Every year in Belgium, many billions in government subsidies from both the federal and regional governments go to industrial companies. All subsidies, however small, help direct investments and activities of industrial sectors. This is why it is important for the government to make sure that these subsidies support the energy and climate transition, with clear and quantified objectives. That way, subsidies can help steer industry in the direction we want. Otherwise, the government will continue to pump resources into perpetuating “fossil” value chains, while it is now clear that we need to make a gigantic change to remain relevant. 

The Flemish government has in recent years taken some modest but nevertheless important steps forward in this regard. Important sources of government funding, such as the strategic transformation support and the so-called ‘compensation for indirect emission costs’, which accounts for millions in support per year, are from now on only accessible for firms that have drawn up a climate roadmap. This reform was part of a broader overhaul of the industrial policy framework, requiring larger companies in particular to prepare a climate plan. 

These are important steps towards a more coherent subsidy policy for (heavy) industry.

Climate roadmaps are strictly necessary to get companies on track for climate neutrality and the Paris Agreement. By chiselling this into the terms of the financial instruments that are already in place, Flanders is preventing wasteful and lock-in inducing expenditures – while also incentivizing firms to plan for the transition. 

Still, there remains much work to be done. Both in terms of support policy and general industrial climate policy. A ‘hands off’ approach still dominates most of Flemish industrial policy, while it’s clear that national targets and tools are needed to accelerate the transformation within the industry. A strategic vision is required, that makes choices on which sectors to focus on: which ones are priority and future-oriented (manufacturing industry such as solar panels, heat pumps, electrolysis engineering….) and adjusting the policy accordingly.

Numerous regional and federal subsidies remain without any link to the climate or energy transition (e.g. much of the federal R&D aid). Even the new climate conditions for Flemish regional aid remain weak for now. So a good principle needs further teeth in practice – and much work remains.