Publications Public finance

France will (finally) adopt a strategy to finance the ecological transition

2 October 2023 - Op-ed - By : Benoît LEGUET

The financing strategy, an essential element of ecological planning, has previously been set out annually in the finance bill. From now on, the government will be drawing up a multi-year strategy that will give both the State and the private sector a clear view of the future. This was long overdue.


The finance bill is here again! It confirms Élisabeth Borne and Emmanuel Macron’s commitments to reducing our dependence on fossil fuels, with increased spending on the ecological transition. Support for the renovation of buildings, public transport, electric vehicles and the agricultural transition will increase by €7 billion in the upcoming 2024 State budget.


This “unprecedented” effort, in the words of the executive, must be sustained for the long term. The report by Jean Pisani-Ferry and Selma Mahfouz estimates that an additional thirty billion euros of public money will be needed per year to finance the transition by 2030. At the same time, balancing the budget will become increasingly challenging: indeed, bringing the tariff shield to an end in 2024 allows considerable leeway.


How can such an effort be maintained for the long term? The public authorities must address two questions: how can the State anticipate public funding needs, both from the State itself and also from local authorities? And how can we attract private sector funds by giving visibility to the sector, and thus ensure the completion of the transition’s “financing plan”.


Towards a public “business plan” for the ecological transition 

A public finance programming law dedicated to the ecological transition would provide an answer to these two questions. While this option has, regrettably, been ruled out for the time being, a major step forward has been taken in the public finance programming law, which is intended to act as a roadmap for the French budgetary pathway until the end of the five-year term, for which the Prime Minister used Article 49.3, allowing the Bill to be passed without a vote. This law, amended by parliamentarians, stipulates that the government must submit a multi-year strategy to Parliament every year that sets out the funding for the ecological transition and the national energy policy. It also requires that this strategy should be debated by the National Assembly and the Senate.


One may be surprised to learn that a long-term economic transformation, such as the ecological transition, has thus far been conducted without a clear definition of the financing and public budgetary effort. Year after year, finance bill after finance bill, the question of “who will pay” over the long term is not addressed. Furthermore, party leaders, from Éric Ciotti to Marine Tondelier, have called for more financial perspectives on the transition, following their meeting in early September with Élisabeth Borne.


From 2024 onwards, the Government will be required to set out its multi-year strategy for financing the transition on an annual basis before the finance bill is assessed, and to put it up for discussion. This will enable the Government and Parliament to anticipate the need for public money; and local authorities and the private sector – which will finance the bulk of the transition – to benefit from medium-term visibility and to make informed choices regarding the necessary investment in both assets and human capital. We are finally drawing nearer to a management method with which the private sector is familiar: a medium-term business plan, discussed with governance, and reviewed each year to adjust for anything that is not going according to plan.


How can we build this type of business plan for the State? One thing is certain: the transition cannot be financed simply through large-scale public subsidies, without standards or taxation; and nor will it be financed purely by setting the “right” carbon price and adding a dash of green finance. The right balance of measures to mobilize depends on the objective and the sector to be transformed. To have a useful debate on the most effective and equitable ways of financing the transition, parliamentarians will have to move beyond party lines. And the Government will need to play the game.


This OpEd was originally published in “Les Échos”

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