Sustainable development and energy

Figures

Moving away from fossil fuels

The law ending hydrocarbon exploration and production in France was adopted in the end of 2017. It will gradually lead to a reduction in hydrocarbon production until 2040, as the concessions come to an end. In order to disincentivize the exploration of hydrocarbon and to compensate communities in the short term for future revenue losses, the fees associated with the extraction of petroleum products have been increased in the amended 2017 Finance Bill. A new underground exploration tax has also been introduced.

These changes have a positive short-term impact, estimated at +€16 million per year. Nevertheless, in the long term, they will lead to an attrition in hydrocarbon production revenues.

Household support for the carbon tax increase

Several measures to help households face the rise of the carbon tax have been agreed:

In total, these measures generate an additional cost of €335 million of State spending, but also €970 million in lower tax spending, thus representing a net positive impact of €635 million on the State budget.

Carbon tax increase

The trajectory of the 2018-2022 Public Finance Planning Act adopted at the end of 2017 foresees a sharp increase in carbon taxation via two measures voted in the initial 2018 Finance Bill:

• Climate and energy contribution: acceleration of the increase of the value of the carbon ton emitted in 2018, then a regular increase until 2022, allowing it to reach €86 per ton in 2022 instead of the €65 previously planned for (in the energy transition law) and generating sharp tax increases on energy products.
• Convergence of gasoline and diesel: the tax differential was around €0.10 per liter in 2017. The goal is to align the two taxation systems within 4 years, instead of the 5 years initially planned for, and to do so only by increasing the taxation of diesel, i.e. an increase of €2.6 per year for 4 years.

The increase in the carbon trajectory, combined with the accelerated convergence of diesel and petrol, will lead to an increase of 12.73 c€/l of E5/E10 petrol, and 25.16 c€/l for diesel, over the period 2017-2022. For a full 50 liters, this represents a tax increase of €6.4 for gasoline, and €12.6 for diesel, according to a Senate report on the taxation of the ecological transition.

These measures make it possible to generate €2.1 billion of additional revenue by 2018, compared to the trajectory currently adopted (“the trend”) in the energy transition law, and up to €8.3 billion in additional revenue by 2022.

Campaign promises

During his electoral campaign, Emmanuel Macron coined the ecological transition one of the biggest challenges of the 21st century. He promised to put an end to the use of fossil fuels in France, to progress towards a carbon-free energy production, to help the circular economy become a new economic model, to protect French citizens’ health and environment, and to support necessary transitions.

Overview

In his first presidential year, Emmanuel Macron first appointed Nicolas Hulot as Minister for the Ecological and Solidary Transition, as Minister of State, and as the second most important member of the government in terms of protocol, thus demonstrating his commitment to the matter. In July 2017, Nicolas Hulot presented a Climate Plan reviewing and adding detail to most of the candidate’s campaign promises.

In September 2017, the first measure of this plan was implemented with the presentation of the legislation ending all oil and gas exploitation and production in France. The project was definitely adopted in December 2017.

In September 2017, the 4 key measures of the Climate Plan were presented: 

• A €1,000 premium for the purchase of a recent vehicle
• The generalization of the “energy check”, already experimented in 4 departments, and replacing social energy tariffs
• The transformation of the energy transition tax credit (CITE) for buildings’ insulation into a premium
• A premium funded by white certificates for low-income households replacing their boiler.

Moreover, in the 2018 Finance Bill, a new trajectory for a carbon tax increase was adopted. Indeed, by 2022, a full tank of fuel of 50 liters will cost €6.4 for gasoline and €12.6 for diesel. Tax on diesel and gasoline have also been aligned.

Although this was not mentioned during the campaign, the project of building a new airport in Notre-Dame-des-Landes was abandoned in January 2018.

Finally, in April 2018, the government presented its roadmap towards a 100% circular economy. By admitting the limits associated with a linear economic model, it puts together a plan, which aims to cut in half discarded landfilled waste, make fiscal adjustments inciting recycling as well as to create local, sustainable jobs that cannot be outsourced.

Beyond these concrete measures, the beginning of this presidential term has been marked by the strong stances taken by the French President regarding climate change, be it in his COP23 speech in November 2017 in Bonn, or at the One Planet Summit organized in Paris in December 2017.

In the first year of this presidential term, the shutdown of the Fessenheim nuclear power plant was confirmed by Minister Nicolas Hulot in November 2017 and should occur in the beginning of 2019. The goal of decreasing nuclear energy’s share in the French energy mix down to 50%, even though it was stated as an official goal in the legislation, has been abandoned. Finally, the restructuring of AREVA (a multinational group specialized in nuclear power and renewable energy, that was majority owned by the French State, and has now been renamed Orano) was completed.

Analysis

The first measures scheduled and implemented – most were announced during the electoral campaign – are not revolutionary.

Nicolas Hulot has so far generalized the experimentations made by the previous government (energy checks), supported existing mechanisms in their evolution (premiums versus tax credits) and rehabilitated old recipes (scrapping premiums).

Rather than a large catch-all legislation like the “Grenelle of Environment” (the Grenelle Acts are two laws adopted by French Parliament in 2009 and 2010, fixing environmental objectives in a wide variety of realms), the government preferred to send a strong political signal with the term’s first environmental law prohibiting oil and gas exploitation by 2040. This very symbolic measure will not have an immediate impact on our hydrocarbons consumption, 99% of which is imported.

Finally, the measure of the year that might have the most impact on climate change could well be the increase of the carbon tax, which is an unpopular measure, given its effects on consumers.

In terms of environmental diplomacy, the French President’s speeches were numerous and sometimes significant, be it during the COP23 in Bonn or the One Planet Summit in Paris. However, this did not influence Donald Trump’s stance – the United States being the second country emitting the most greenhouse gas in the world after China – which withdrew from the Paris Agreement.

Overall, the decision to cancel the airport project in Notre-Dame-des-Landes, which had not been announced during the campaign, is probably the most striking environmental measure taken in this first year of Emmanuel Macron’s presidential term.

And now?

From an environmental standpoint, the executive might disappoint if it does not show an efficient and short-term way towards the decarbonization of the economy. After the symbolical measures it has undertaken (such as prohibiting the exploitation of hydrocarbons by 2040), the government must now tackle the root of the issue, starting with transport and the heating of buildings, which are the first emitters of greenhouse gas in France. Some measures have been taken in this direction (scrapping premiums, increasing the carbon tax, putting in place premiums for improving buildings’ insulation and replacing boilers), but no global vision of the objectives and means has been given regarding what should be implemented in order to reach decarbonization.

At the end of this presidential term, there is a risk that we might observe a mismatch between the results concerning the decrease of greenhouse gas emissions and pollution on the one hand and the (often costly) mechanisms implemented by the government on the other. Besides, very little has been done so far to render sustainable development socially acceptable, in particular by those with low incomes. Indeed, such a narrative can be rejected, especially in rural and disadvantaged areas, even though they are the most impacted by climate change.

The government will have to settle the country’s energy mix issue in 2018. The answer to this question, the financial, environmental, industrial and social implications of which are huge, will bind France for the coming decades.

The second year of the presidential term will see the launch of the debate on the energy multiannual program, which will include questions regarding the shutting-down process of the oldest nuclear power plants, as well as the major upcoming refit of other nuclear power plants. The economic model of the nuclear branch issue will have to be tackled. A decision on the effective shut-down of coal-fired power plants will need to be taken.

The government will also have to implement practical measures regarding the fight against planned obsolescence and the goal of 100% recycled plastic on the whole territory. The fight against car pollution is still underway. The prohibition of endocrine disruptors – a topic also tackled at the European level – is still in the pipeline.

Finally, diplomatic efforts will need to be relentlessly pursued, especially in order to convince the United States to join the Paris Agreement again.