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An international consortium of 14  expert organisations, including I4CE, has launched the “Energy Policy Tracker” website to track Covid-19 recovery packages from a climate and energy perspective. Initial results show that until now, G20 countries have granted much more aid to fossil fuels than to clean energies. What about France? Louise Kessler, Director of I4CE’s Economics Programme, looks back at the government policies already adopted in France as well as those that are still at the announcement stage.

€18 billion for sectors that consume a lot of fossil fuels, with poorly specified environmental compensation.

Since the start of the pandemic, at least €21.1 billion in public financial support for sectors which have a direct impact on GHG emissions has been adopted – or is in the process of being adopted under the 3rd Amending Budget Act. This does not include the €20.0 billion for the ecological transition announced by the French Prime Minister on the 15th of July 2020

A very large share of this aid will go to sectors that are heavy consumers of fossil fuels. This is particularly the case for the €7 billion in state-guaranteed loans and cash advances for Air France-KLM, the €5 billion in state-guaranteed loans for Renault and other support measures for the automotive industry (including a conversion bonus to which some internal combustion vehicles are eligible), or the postponement of the withdrawal of tax breaks for non-road diesel.

In total, support measures for high-emission sectors amount to €17.8 billion. Almost 75% of this aid is in the form of guaranteed loans or cash advances.

While this aid is meant to maintain businesses and safeguard jobs, it also contributes to perpetuating economic models that are not compatible with France’s commitments in terms of carbon neutrality. The good news is that France stands out from the other G20 countries by making a large part of this aid conditional on GHG emissions reductions by the supported sectors. Out of this €17.8 billion, €13.8 billion is conditional on environmental requirements. The bad news is that these requirements remain very vague: they do not include legally-binding commitments and most of them are insufficiently detailed. As an illustration, the Air France-KLM rescue plan includes the reduction of short-haul domestic flights on routes where rail alternatives exist, but specific goals have not yet been published.

Only €3 billion of financial support for energy transition sectors

Direct support measures for sectors which are key to the energy transition have also been taken by France, for a total estimated amount of €3.3 billion. These cover the reinforcement of the ecological bonus for electric or plug-in hybrid vehicles, financial support for the pilot plant for the manufacture of electric batteries, a bicycle plan, support for R&D for a carbon-neutral plane and an increase in the allocation to support local investment in the fields of energy transition and health.

In contrast to support for fossil fuel-intensive sectors, energy transition support measures are based solely on direct investment and subsidies.

Table : Recovery measures with direct impacts on GHG emissions

Last updated on 15/07/2020 

Notes:

  • Figures with an asterisk are based on estimates made by I4CE.
  • The figures in brackets indicate revenue for the state.
  • A more detailed table is available here.
  • This table lists only the support measures for highly emitting sectors or for key sectors of the energy transition. It does not cover other sectoral recovery plans which may have an indirect impact on emissions.

 

An inflection point towards a recovery compatible with carbon neutrality objectives?

The measures adopted so far have addressed the most urgent need: maintaining jobs and reviving the economy. They have mainly benefited sectors which are high emitters because they represent significant employment pools. Similarly, we can imagine that the reason why  environmental counterparts have not been more detailed yet, is because these support plans were negotiated in a hurry.

The first challenge is now to make these eco-conditionalities effective: this will require detailed commitments by the companies which received support, as well as a process to assess and monitor these commitments over time. A review of the measures which have been adopted so far highlights the fact that many key sectors of the low-carbon transition have not yet received public financial support: this is the case for energy efficiency in buildings, rail transport, urban public transport networks and renewable heat and gas networks. The second challenge is therefore to make up for this gap in climate investments. According to I4CE, additional public support of €9 billion per year in 2020 and 2021 is needed to put France on the trajectory of the National Low Carbon Strategy and achieve carbon neutrality by 2050.

The government seems to have realised this challenge and new measures have already been announced. The President of the Republic recently mentioned an additional €15 billion over two years for the “ecological conversion” and the Minister for Ecological Transition has announced a recovery plan for the railways. Similarly, the Minister of Housing has just announced several billion euros for the energy renovation of buildings, and the Minister of Transport had already promised to speed up the deployment of charging stations for electric vehicles several weeks ago. The announcement made by the Prime Minister Jean Castex during his General Policy speech on July 15, 2020 of a €20 billion recovery plan to support the energy transition seems to confirm that the government is aware of need to support investments in key sectors of the energy transition. Detailed measures have not yet been outlined, but this € 20 billion should cover, among other things, energy efficiency in buildings, the reduction of GHG emissions in the transport and industrial sectors, an ambitious bicycle plan, and support for green technologies. The tables above will be regularly updated to enable you to follow France’s financial efforts to combine recovery and climate change.

The French President has backed almost all of the propositions made by the Citizens’ Convention on Climate, some of which involve substantial financial efforts.

French President Macron has backed nearly all of the measures proposed by the Citizens’ Convention on Climate (CCC), some of which involve substantial financial efforts by the State in the form of investments and subsidies. Some of these measures would also generate new tax revenues: for instance a stronger malus on polluting cars, the reinforcement of the eco-tax on air travel and a 4% tax on dividends paid by companies could represent, in total, nearly €9 billion in additional revenue per year in the short term. This proposal of a tax on corporate dividends is one of those which have been rejected by the French  President in his speech to the 150 citizens.

The list below shows the measures proposed by the CCC which would have a non-negligible impact on public finances (over €1 billion each). It will also be updated regularly as CCC measures are clarified, adopted or rejected. The monetary estimates attached to these measures has been carried out by I4CE.

Table : Follow-up on the announcements of the Citizen’s Climate Convention with a significant impact on public finances

Last updated on 15/07/2020 

Notes:

  • Figures with an asterisk are based on estimates made by I4CE.
  • The figures in brackets indicate revenue for the state.
  • A more detailed table is available here.


Contact


Louise KESSLER

Program Director - Economy

Louise joined I4CE in 2020; she oversees the Economics programme, which aims to contribute to the debate on the economic instruments and public policies which can be mobilised to trigger the investments necessary for the low-carbon transition.

Before joining I4CE, Louise spent two and a half years at the economics consultancy Vivid Economics, where she managed projects for government institutions and international organizations on issues related to climate policies, the energy transition, innovative financing mechanisms for adaptation and biodiversity. Before that, she spent a couple of years in the Natural Resources Mergers & Acquisitions team at Macquarie in London, and in the Investments team at CDC Climat.

Louise is a graduate of HEC Paris; she also holds a Research Master in the Economics of Sustainable Development, Environment and Energy (EDDEE) delivered by Mines ParisTech, and a PhD in Environmental Economics delivered by the London School of Economics (LSE). Her research focused on the economic implications of climate change uncertainties.

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