These developments are affecting households’ ability to invest in transition solutions. We have therefore updated the analyses of our French Observatory of access conditions to the ecological transition for households and revised the key indicators used to assess the ability of middle- and low-income households to invest in an electric vehicle, a deep energy retrofit, or a heat pump.

Three main conclusions emerge from this update:

1. Under current conditions, buying a second-hand electric vehicle is becoming more advantageous than continuing to drive an old combustion engine car. With petrol prices exceeding €2 per liter and declining prices for second-hand electric vehicles, the energy savings cover the out-of-pocket repayments for purchasing a used electric car.

    

2. The out-of-pocket cost for a deep energy retrofit of a house has increased by €20,000 in 2026 and now exceeds €40,000. The sharp increase in public aid in 2024 has been completely offset by reductions this year. Nevertheless, for households that manage to finance the work, retrofit still generates savings. Indeed, the energy savings from a deep energy retrofit cover the out-of-pocket repayments of a zero interest eco-loan.

    

3. Installing a heat pump is becoming even more attractive for households in 2026. The revision of “Coup de pouce chauffage” (a bonus for replacing a heating system with a low-carbon solution) has reduced the out-of-pocket cost by €3,000 since last year. At the same time, rising fossil fuel prices are increasing the potential savings from installing a heat pump.

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L’article Electric cars, home reprofit, heat pumps: Can the middle class afford to invest in 2026? est apparu en premier sur I4CE.

The beginning of 2026 has proven to be economically turbulent. The increase in fossil fuel prices caused by the war in the Middle East has driven up household energy bills. In this context, investments that allow households to free themselves from dependence on fossil fuel -electric vehicles, heat pumps, home insulation- are attracting growing interest and the government recently presented its plan to electrify end-use sectors in order to speed up the transition to electric uses.

At the same time, public aid programs for energy retrofit and electric mobility have been revised, sometimes involving significant cuts. Finally, while the cost of energy retrofit continues to rise, the trend is beginning to reverse for electric vehicle prices.

These developments are affecting households’ ability to invest in transition solutions. We have therefore updated the analyses of our French Observatory of access conditions to the ecological transition for households . We have updated the key indicators that allow us to assess the capacity of two households profiles to invest in the transition: the Fields family and the Newtown family, both of whom are middle-income households, own their homes, and are dependent on cars daily.

Result #1: Under current conditions, buying a used electric car is becoming more advantageous than continuing to drive an old combustion engine car.

At the beginning of 2025, purchasing a used electric car on credit to replace their old combustion engine vehicle would have strained the budget of the Fields household, one of our middle-income household profiles used in our latest study, living in a rural area. Indeed, the fuel savings, which we estimated at 120 euros per month, were insufficient to cover the loan repayments, even considering the down payment obtained from selling their old vehicle. Switching to an electric vehicle would thus have cost this household nearly 60 euros more per month, considering fuel, maintenance, insurance, and the zero-interest eco-loan (éco-PTZ) repayments (Figure 1).

Recent changes in energy prices and the price of used electric cars have changed the game: the Fields family can now afford to buy a used electric car, saving around ten euros a month under current conditions. Indeed, with gasoline prices exceeding two euros per liter last March, the energy savings from switching to electric would now amount to more than 140 euros per month. At the same time, the price of a used electric city car has decreased since last year, as have interest rates, thus reducing loan repayments.

Result #2: The out-of-pocket cost for deep energy retrofits has increased by 20,000€ in 2026, but this investment still allows households to save money.

Long considered marginal compared to individual upgrades, deep energy retrofits have finally taken off in recent years, reaching 120,000 retrofitted homes by 2025. This is largely due to the 2024 implementation of the MaPrimeRénov’ « Parcours accompagné » scheme for deep energy retrofit, which was particularly advantageous for households. In 2025, the Fields family, a lower-middle-income household, was estimated to receive over €40,000 in public aid for the deep energy retrofit of their oil-heated rural home. This left them with only €21,000 to pay for the investment, a historically low out-of-pocket cost (Figure 2).

However, the scheme ultimately became a victim of its own success, so much so that by mid-2025, almost all the allocated funds had been exhausted, leading to the closure of the grant application process. After a lukewarm reopening at the end of 2025, the French National Housing Agency (Anah) finally implemented a reduction in the maximum eligible work amounts and the elimination of the « sortie de passoire énergétique » (energy efficiency upgrade) bonus for 2026. The result for the Fields family: an increase of over 20,000 euros in their out-of-pocket expenses for retrofitting their home, as the reduction in aid amounts in 2026 more than offset the increase in 2024. The Fields family’s theoretical borrowing capacity is sufficient to finance this out-of-pocket cost with a loan, but their room for maneuver has shrunk, and many other first-time homebuyers do not have sufficient financing capacity.

FIGURE 2 – EVOLUTION OF THE OUT-OF-POCKET COST FOR THE DEEP ENERGY RETROFIT OF AN OIL-HEATED HOUSE BETWEEN 2023 AND 2026 FOR A LOWER MIDDLE-INCOME HOUSEHOLD

Meanwhile, the surge in heating oil prices since last January is increasing the Fields household’s heating bills if they don’t retrofit their home. Deep energy retrofits therefore still allow the household to make significant net savings on their monthly housing budget, in the order of 120 euros, which is a few euros less than in 2025.

Result #3: Installing a heat pump becomes even more attractive for households in 2026, due to increased aid amounts and rising fossil fuel prices.

While overall aide amounts for deep energy retrofits decreased in 2026, this was not the case for subsidies for heat pump installations. The amount of the « Coup de pouce chauffage » (a bonus for replacing a heating system with a low-carbon solution), which the Newtown household – a upper middle-income household- could receive for their gas-heated suburban house, has more than doubled since last year. By combining this aid with the MaPrimeRénov’ scheme, the out-of-pocket cost for installing a heat pump fell from 12,000€ to 9,000€ between the beginning of 2025 and 2026.

Concerning the energy bill, the consequences of the war in the Middle East are also being felt on gas prices in France. The French Energy Regulatory Commission has announced an increase in the benchmark gas price for May, which had previously remained unchanged. The potential savings on the Newtown household’s energy bill will therefore increase if they replace their gas boiler with a heat pump.

In this new economic context, the installation of a heat pump would ultimately allow the Newtown household to save around 100 euros per month, considering the repayment of an eco-PTZ to finance the purchase of the heat pump, thirty euros more than in 2025, while protecting them from potential future increases in the price of gas.

FIGURE 3 – MONTHLY BUDGET BEFORE AND AFTER THE INSTALLATION OF A HEAT PUMP IN 2025 AND 2026 FOR AN UPPER MIDDLE-INCOME HOUSEHOLD

The energy crisis we are currently experiencing may well persist over the long term. The government’s electrification plan is expected to help protect households most exposed to future increases in fossil fuel prices. Among the measures put forward are the continuation of the “social leasing scheme” (a State-aided car leasing program that allows low- and lower-middle-income households to rent an electric car for a relatively low rent)  and the strengthening of support for certain professions for mobility, as well as the introduction of a heat pump leasing scheme for housing. We will document the impacts of these measures, along with other developments, on different household profiles and on their capacity to invest in the transition in our 2026 edition of the French Observatory of Access Conditions to the Ecological Transition, to be published next September.

L’article Energy crisis, changes in public aid: can households switch to electric cars and retrofit their homes in 2026? est apparu en premier sur I4CE.

In an op-ed for Les Échos, I4CE  Executive Director Benoît Leguet argues that French industrial policy must now pivot decisively from supply-side support to demand-side steering. The diagnosis is clear: firstly, gigafactories were built before critical input supply chains were secured. Secondly, not a single European synthetic fuel project has reached final investment decision in the absence of long-term offtake contracts with airlines and fuel providers. The toolbox to fix this exists, but is underutilised and is incomplete: mandatory environmental and local content criteria in public procurement, long-term contracts to secure offtake, standards that align private purchasing with industrial strategy. 

Some of the most powerful levers run through Brussels as much as Bercy – and the Industrial Accelerator Act and the design of the next European multiannual financial framework (2028–2034) are precisely the frameworks France should help shape.

This EU budget and in particular the proposal for a European Competitiveness Fund is the focus of a blog by cleantech researchers Ciarán Humphreys and Elena Schneider, reacting to the European Parliament’s ITRE committee draft report on the matter. The proposed Economic and Technological Advisory Council is a step forward for more targeted public spending, and a revival of some of the original ambition behind the Competitiveness Coordination Tool – but without a public data observatory and real coordination with Member States, €234 billion will not be enough to align twenty-seven national industrial strategies. 

In Paris or Brussels, it is clear that green industrial policy is no longer short of plans or political ambition. What is needed now is the coordination to pull demand, investment and disparate national interests in the same direction, towards a decarbonised, competitive industrial base.

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L’article Green industrial policy: building the market, not just the factory est apparu en premier sur I4CE.

The France 2030 investment plan was built around an ambitious bet: transforming historic industrial strengths – steel, automotive, aerospace – into competitive pillars of a decarbonising economy. 

Five years on, the results can be seen, and new green industrial ecosystems are emerging. Battery gigafactories have been built. ArcelorMittal has taken a final investment decision for an electric arc furnace in Dunkirk. A solid pipeline of synthetic aviation fuel projects is taking shape, positioning France as a potential European leader in sustainable fuels. These are not negligible achievements. 

But without a qualitative leap in our cleantech industrial policy, we risk being unable to go much further. Whether for batteries, green steel or sustainable fuels, subsidising projects is not enough: it is the entire value chain that needs to be secured. 

Neglected links in the value chain 

In each of these sectors, the upstream sectors remain dangerously exposed. Battery gigafactories were built before supply chains for critical inputs were secured – leaving production dependent on imported materials, predominantly from China. 

On the sustainable fuels side, in the absence of long-term offtake contracts with airlines, not a single project has yet crossed the threshold of a final investment decision. The conditions are nonetheless in place for France to master the first building blocks of this value chain, from low-carbon hydrogen production to final fuel synthesis. If it ends up importing Chinese e-methanol – one of the priorities of China’s latest five-year plan – for simple conversion on French soil, it will retain only the last link in the chain. 

The mistake is to allow the gap between announced ambition and the actual construction of value chains to widen, leaving outside competitors to rush in and fill the gaps in the chain. 

Demand-side steering and budgetary coherence 

What needs to change? Too long focused on supply, industrial policy must now be structured around genuine demand-side steering: environmental and “Made in Europe” criteria in public procurement, long-term contracts to secure initial markets, standards to align private purchasing with industrial strategy. 

Budgetary coherence is also at stake. In a context of tight constraints, every public euro must earn its place. It is increasingly difficult to justify a budgetary arrangement that still channels nearly €2 billion a year in tax advantages for corporate fleets towards combustion-engine models – all the more so in the current energy context. And while the social leasing scheme announced by the government is indispensable in this same context, it will become difficult to justify such a scheme if only 18% of the vehicles leased are assembled in France. 

French sovereignty runs through Brussels 

The challenge is not to spend more – it is to stop subsidising against our own objectives. And the most powerful lever available to France lies less with Bercy than with Brussels. The Industrial Accelerator Act proposed by the Commission in March 2026 is precisely the framework that France must help shape and champion. It is in the intelligent articulation of national and European tools that industrial strategy becomes durable. 

France has the innovators, the industrial base and the policy foundations to contribute to Europe’s green reindustrialisation. The question is whether we consolidate that position – or whether we allow the gap between ambition and execution to become an opportunity for others. Industry, decarbonisation and sovereignty must now be placed firmly at the heart of the political debate ahead of the 2027 election – without forgetting to act before then. 

L’article Cleantech: after the supply-side push, time to tackle demand est apparu en premier sur I4CE.

In March of this year, with the world’s attention fixed on the war in Iran and the fate of the Strait of Hormuz, Beijing quietly unveiled its 15th Five-Year Plan. Tucked into its 109 “major engineering projects” was a clear statement of industrial intent for 2026–2030: a fully integrated green hydrogen-to-green-fuels value chain, next-generation batteries, and a significant expansion of nuclear and renewables. 

Brussels has been having its own debate on strategic prioritisation. Since the clear diagnosis of the Draghi report, the idea that the EU must make choices if it wants to compete in the clean industries of the future has become increasingly orthodox (even if those choices have yet to be made by policymakers). This week’s publication of the draft report from the European Parliament’s Industry, Research and Energy committee (ITRE) gives us a further indication  on whether we are actually moving in that direction. 

Why the Competitiveness Fund matters 

It is worth being explicit about why the ECF deserves so much political attention. Strategic prioritisation without investment capacity is an empty exercise; investment without strategic targeting is a slow-motion misallocation of public money. As we argued last year, the ECF is the primary EU-level lever for a more targeted, better-funded European green industrial policy that can deliver on both competitiveness and decarbonisation. If strategic prioritisation does not show up here, it will not show up at all. 

The good news: ITRE proposes expert governance for the Fund 

The most interesting move in the ITRE draft is the proposed Economic and Technological Advisory Council (ETAC): a body of up to fifteen independent experts, appointed through open call, advising the Commission on economic and technological developments, market failures, and the identification of strategic portfolios across ECF sectors. The Council would publish an annual report each September, and would operate independently – although how binding their recommendations would be on eventual funding decisions remains unclear. The purely expert nature of the ETAC, with no structured participation from any of the EU institutions, risk leaving this new body isolated.  

Nonetheless, this is a welcome proposal. It is also strikingly familiar. In terms of expert guidance on strategic priorities, it reflects what I4CE – and others – had expected to see emerge from another Draghi-inspired initiative: the Competitiveness Coordination Tool (CCT). The CCT was meant to provide precisely this combination of independent analysis, diagnosis of current weaknesses, and strategic steer. Instead, the CCT is being “tested” through narrow pilots on AI Gigafactories and e-truck charging infrastructure, as well as further initiatives in the fields of housing and the bioeconomy. In practice, it is drifting towards becoming an umbrella label for unconnected cross-border projects rather than a governance architecture for industrial policy. Seeing the original spirit of the CCT kept alive through the ECF’s governance is therefore no small thing. 

But a council of experts is not enough

An ETAC is a step in the right direction, but if it ends up being the entirety of the EU’s governance upgrade for industrial policy, then it will be seriously insufficient. Two things are missing: better data, and broader coordination. 

Better data

Industrial policymakers make consequential investment decisions in a chronically thin information environment. That gap is today filled, by default, by industries and advocacy groups. They have a legitimate role to play – but independent, public-interest data is indispensable if strategic prioritisation is to mean anything more than following the loudest voices in the room. Civil society can and does help: I4CE‘s State of European Climate Investment work, and our contribution to the European Climate Neutrality Observatory, are proof of concept. But the EU itself is best placed to build this resource at scale. 

That is why it is disappointing that the ITRE draft report deletes the Commission’s proposal for an Observatory of Emerging Technologies as part of the ECF governance framework. A body along these lines – perhaps building on the existing expertise of the Commission’s Joint Research Centre (JRC), as recently proposed – would be the natural complement to the ETAC, providing the transparent, public data foundation on which its recommendations would rest. Without it, there is a real risk that the Council of experts becomes just one more voice among many, easily drowned out during the annual budgetary horse-trading that will actually decide how ECF money gets spent. Data gives expert recommendations teeth. 

Broader coordination

The proposed €234 billion envelope for the ECF over seven years is not trivial, but it is a rounding error next to Chinese industrial investment. It is also significantly smaller, on an annualised basis, than Germany’s €500 billion special fund for infrastructure and climate – a national instrument. If strategic prioritisation applies only to ECF disbursements, then the vast majority of relevant public investment capacity across the EU – national budgets, IPCEIs, state aid under the Clean Industrial Deal State Aid Framework, the cohesion funds, EIB lending – will remain outside the ETAC’s remit, steered by twenty-seven uncoordinated sets of priorities. That is not going to match the coherence of Chinese or American industrial policy. It is not even going to match Germany’s. 

The EU has models to build upon. The European Semester, for all its flaws, shows how macroeconomic and budgetary dialogue between the Commission and Member States can be structured; and its interaction with the Recovery and Resilience Facility (RRF) demonstrated, perhaps more powerfully than any other recent instrument, what happens when you pair coordination and conditions with real financial incentives. Linking disbursements to reforms lifted the implementation of Semester country-specific recommendations by 17 percentage points – a striking shift in a framework that had been oft-criticised for its inability to shift national decision-making.  

In the sectoral space, the Energy Union and offer a working template of comparable scale. Created to bring coherence to a fragmented landscape of largely national energy policies, its 2018 Governance Regulation – up for review by the end of the 2026 – established a structured cycle. Member States set out national contributions to shared EU targets, while the Commission provides guidance before adoption and monitors progress thereafter, and a high-level Task Force coordinates more pressing areas of action. 

Industrial policy has no equivalent. It remains stuck between an exclusive competence toolkit (state aid and competition policy, largely designed to prevent bad outcomes in the Single Market) and a patchwork of weaker enabling instruments – Auctions-as-a-Service, Grants-as-a-Service, IPCEIs – that streamline investments and pool resources but do too little to build genuine cross-border value chains. 

What’s needed: an Industrial Policy Union 

This is where the original ambition for a Competitiveness Coordination Tool still has something to offer – a genuine coordination framework. Thought of as an Energy Union for industrial policy, the CCT could give Member States a structured space to align behind the strategic technology priorities identified by an Observatory and the ETAC; to map national strengths onto pan-European value chains in batteries, electrolysers, heat pumps, grid equipment, clean steel and the rest; and to coordinate state aid and regulatory measures so that each Member State’s investment reinforces the others rather than cannibalising them. 

The RRF is winding down in 2026 with no real successor in sight, which means the EU’s most effective coordination lever is about to disappear just as global industrial competition intensifies. A properly designed ETAC, backed by a public data observatory and embedded in a real coordination framework with Member States, would start to fill that gap. Hoping that €234 billion over seven years will, by itself, be enough to nudge twenty-seven capitals towards a coherent European industrial policy is not a strategy. Therefore, a fully-developed coordination architecture remains crucial. 

China has a plan. Germany has a fund. The EU is taking its first steps towards developing both. The ITRE text is  promising – but if Europe wants to truly update its industrial policy, there is still some ground to cover.  

L’article The European Competitiveness Fund – one more step towards a European Green Industrial Policy? est apparu en premier sur I4CE.

With France 2030, the country is attempting to transform existing value chains, such as steelmaking, automotive and aerospace, from 20th century strengths into competitive industries for a decarbonising 21st century, while building the industrial and energy infrastructure necessary for that transformation to be one that is truly “Made in Europe”.

A project developer needs to be sure of their tools and materials before the workers can break ground. Any disruption to the supply of materials or connection to the grid leads to delays, cost overruns, and the prospect of failure. Transforming entire industries requires the same considerations, but on a national scale. In our latest I4CE paper, we examine the progress made across three value chains crucial for France’s green industrial base – batteries, green steel, and synthetic sustainable aviation fuels.  

Fortunately, policymakers can already point to good progress on the ground. From the gigafactories and the emerging “Vallée de la Batterie” in the north and Arcelor Mittal’s landmark €1.3bn investment in Dunkirk to Fos-sur-Mer in the south, new green industrial ecosystems are being built.  

Yet weaknesses in the supply chain could risk this momentum hitting a brick wall. Several projects across all three sectors are stalled, waiting for final investment decision. Investors, for their part, are hesitant to commit to risky, innovative projects in the face of higher productions costs and stiff competition from China and other global players.  

To keep this project on track, policymakers need to take another look at their toolbox, such as targeting public funds at supporting projects over the finish line and during their difficult first years of operation. Doing so is a matter of urgency. The plans are drawn, the groundwork laid – but unless financing catches up with ambition, the green industries of tomorrow will be built elsewhere. 

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L’article France has the blueprint for green reindustrialisation – but does it have the necessary tools ? est apparu en premier sur I4CE.

Many solutions exist to meet these objectives, but all require one essential component: planning, and in particular long-term investment planning. The forthcoming revision of the Governance Regulation of the Energy Union and Climate Action offers a unique opportunity to transform the National Energy and Climate Plans (NECPs) into genuine investment plans. These plans could enable Member States not only to address the current energy price crisis by accelerating the energy transition, but also to drive the modernisation and economic development of their countries. To achieve this, these plans must go beyond a tick-box compliance exercise and be backed by political ambition to reflect Member States’ strategic priorities. Their framework must also adapt to the investment strategies already in place within Member States.

In response to the European Commission’s consultation on the revision, I4CE outlines the key components of a climate and energy investment plan. We propose a toolkit to assist policymakers in designing these plans, from estimating climate investment needs, to defining public policies and spendings to close the investment gap, and accounting for macroeconomic implications. We also highlight critical success factors for implementation, including incentives linked to the EU budget, capacity building support, and the need for improved tracking of private investment data at the European level. 

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L’article Turning national and energy climate plans into investment plans est apparu en premier sur I4CE.

France, autumn 2021: faced with a sharp rise in energy prices, the French government announces a package of emergency measures within a few months to protect households and businesses. Cost to the public finances from 2021 to 2024: nearly €100 billion, including €10 billion for aid directly linked to rising fuel prices alone. 

France, March 2026: faced with a sharp rise in energy prices, questions about what the government should do are resurfacing. And whilst the French local elections partially overshadowed the search for solutions to the price crisis until last week, the French government will need to stand firm in the coming weeks. Particularly on the urgent issue of oil. 

No discount at the pump 

2022 was the year of the pump discount in France, and in many other Member States. In the absence of preparation, resorting to such a measure made political sense: immediate implementation; via an existing distribution channel; and visible assistance with every fill-up. 

But this discount suffers from the same three flaws as a generalised reduction in fuel taxes. Inefficient, it benefited many households that had absolutely no need for it. A drain on public funds, it cost France €8 billion in 2022. Disastrous for sovereignty, it further trapped the country’s economy in its costly dependence on imported oil. 

Imperative in 2026, for all the EU Member States: reserve any pump discount or similar measure solely for low-income households with no alternative, and set a time limit on it. The European Council, in its conclusions on March 19, called on the Commission to present a toolbox of targeted temporary measures to address the recent spikes in the prices of imported fossil fuels.  

Energy sufficiency 

Now, however, is the time to implement an energy sufficiency plan, as France and other EU Member States did in 2022. First, individual energy sufficiency, which can be implemented immediately, at least for those who have the means to do so: carpooling, driving more slowly to reduce fuel consumption, using public transport, cycling, and working from home. 

Collective energy sufficiency next, which can be implemented in the short term. By developing public transport, and more broadly by promoting alternatives to single-occupancy car use: utilising existing road infrastructure with cycle lanes or express bus lanes; using the current vehicle fleet to develop carpooling routes; developing on-demand transport with electric vehicles; and reducing speed limits. Local authorities will be key in implementing this collective aspect. 

Going electric 

Finally, let us remember that the problem with petrol prices at the pump… is petrol itself. Now is the time to switch to electric. A household with an old combustion-engine vehicle that buys an electric vehicle on credit saves around ten euros a month. Immediately. The millions of households that have already switched to electric are, in fact, largely spared by the rise in fuel prices. 

For low- and middle-income households, the high initial cost of an electric vehicle is a barrier. In France, social leasing has already enabled 100,000 low-income households to acquire one in 2024 and 2025. Expanding similar schemes across more EU Member States would provide permanent protection for more households, at a minimal cost. In the case of France, protecting a further 200,000 households each year would cost €1.6 billion per year – equivalent to a widespread discount at the pump of just 3 cents per litre. 

And for households unable to benefit from the scheme immediately, targeted, time-limited support with priority access to future leasing schemes. A way of preparing for the transition ahead. And of revealing latent demand to car manufacturers, as a prelude to ambitious electrification plans led by Member States. 

L’article Energy crisis: protecting people in the long term est apparu en premier sur I4CE.

The EU’s assumptions regarding the capacity of ecosystems to sequester greenhouse gas (GHG) emissions should be treated with caution 

By 2040, the majority of Europe’s GHG emissions sequestration is expected to come from the land sector, or the LULUCF sector (land use, land-use change and forestry). According to the European Commission’s impact assessment, the level of sequestration in ecosystems is projected to reach -317 MtCO2 in 2040.  

However, recent trends in the carbon sink should prompt Member States to be cautious about the level of carbon sequestration that can realistically be expected. Between 2014 and 2023, the EU’s average annual net carbon sink decreased by 30%, standing at -198 MtCO2. In light of this, the European Environment Agency therefore considers it unlikely that the target set by the EU LULUCF Regulation (which defines emissions targets for the land sector) of -310 MtCO₂ sequestered in ecosystems by 2030 will be met. Furthermore, the growing impacts of climate change make the future of the natural carbon sink particularly uncertain: projections estimate that European ecosystems could sequester between -100 and -350 Mt CO₂ eq by 2050.

The decline in the carbon sink is driven by the decline in the forest carbon sink 

Forests are the main carbon sink in Europe. Between 1990 and 2022, European forests absorbed nearly 10% of the EU’s GHG emissions.  

But over the last 10 years, this trend has been disrupted. Despite an increase in forest cover, the forest carbon sink is shrinking: forests continue to store carbon, but at a slower rate than before. Over the course of a decade, the forest carbon sink has thus fallen by nearly a third, from -456.9 MtCO2eq/year over the 2010–2014 period to -332.6 MtCO2eq/year between 2020 and 2022. This trend is evident across all European regions to varying degrees. In France, the forest carbon sink has been divided by two.  

This trend can be attributed to several interrelated factors, the exact extent of which has yet to be determined: 

• Increased harvesting; 

• Increased tree mortality due to climate change, which leads to a rise in extreme weather events and natural disturbances such as forest fires, droughts and pest outbreaks (bark beetles, pine nematodes, etc.);  

• Slower forest growth due to more frequent droughts; 

• A slowdown in afforestation and forest expansion in certain contexts.  

These factors can broadly be divided into two categories. On the one hand, there are long-term factors (spanning several decades), which are difficult to predict and therefore difficult to manage: first and foremost, the effects of climate change. On the other hand, there are factors whose effects are more predictable in the short term and can be managed through public policy and adjustments to forestry practices. These factors include, amongst others, the rate of afforestation and the level of harvesting.

Step up efforts on what we can manage

Several regulations need to be updated to effectively reflect the implementation of the agreement on the European target for 2040. These include the LULUCF Regulation (covering emissions from land use and forestry) and the Effort Sharing Regulation (ESR), which concerns emissions from transport, agriculture, buildings and waste. Failing to properly account for changes in the forest carbon sink during the revision of these regulations could jeopardise Europe’s decarbonisation pathway.  

To avoid this, one option could be to factor in a more modest contribution from forests and to step up efforts on the factors we can managed in order to safeguard the natural carbon sink.

In practical terms, this means: 

1. Calibrating European climate policies on the basis of a conservative assumption regarding forest carbon sinks and anticipating greater emission reduction efforts in other economic sectors; 

    

2. To raise the targets for manageable levers capable of increasing the natural carbon sink. These levers include:  

• Increasing the use of long-lived wood products. Depending on the scenario, this lever could sequester between -23 and -39 MtCO2/year by 2030. 

• Increasing storage in agricultural soils. A study estimates the potential of this lever at between -150 and -350 MtCO2/year at European level. It is based on three key practices:  

• • Agroforestry and the planting of hedgerows, which could sequester up to -60 MtCO2/year  

• • Prioritising grass in animal feed (without, however, increasing livestock numbers), with a sequestration potential estimated at -45 MtCO2/year 

• • The introduction of catch crops, which could also enable the storage of approximately -45 MtCO2/year; 

The publication of the impact assessment accompanying the revision of the LULUCF and ESR regulations, scheduled for the summer, will be a milestone in evaluating the EU’s strategy responding to the loss of the forest carbon sink. At the same time, the implementation of the CRCF (Carbon Removal and Carbon Farming) Regulation must provide a framework capable of supporting the development and financing of the various levers. For the CRCF to realise its full potential, the challenge will be to generate sufficient demand for European carbon credits.

L’article Reinforcing Europe’s carbon sink through actionable levers est apparu en premier sur I4CE.

However, the debate in Europe is not trending in this direction.  Part of the industry, supported by some European leaders such as German Chancellor Merz, warns against a decline in competitiveness and calls for a weakening of the ETS and a cap on carbon prices, calling into question the future of this crucial mechanism.

As our Chairman Jean PISANI-FERRY and Executive Director Benoit LEGUET argue in Les Echos this week, taking a step back now would jeopardise Europe’s progress towards a decarbonised industrial base. I4CE’s Panorama of Climate Investments shows that, in France, an additional €4 billion in annual decarbonisation investment is required until 2030, which would be made harder if ambition is lowered.   

Indeed, the debate in Brussels and national capitals this year should focus on strengthening, not weakening the ETS. Revenues are crucial not only for supporting domestic investment in decarbonising industry today, but to supporting European mechanisms developing the climate innovation needed tomorrow, such as the EU Innovation Fund and the forthcoming Industrial Decarbonisation Bank. If we take a step back on the ETS, these important funds will suffer.

Above all, it is counterproductive to get bogged down in negotiations on a price cap. This would undermine the business model of decarbonised industry, compromise the credibility of Europe’s climate objectives, while jeopardising our climate leadership just as carbon pricing gains momentum globally.  

In the face of a new wave of backlash against the ETS, it is important to remember that chaos does not support competitiveness. Europe must remain firm, strengthening the ETS to build a world-leading, innovative green industrial base.  

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L’article Stay the course: why a stronger ETS is the key to industrial competitiveness  est apparu en premier sur I4CE.