Economic Policies for Affordable, Secure and Clean Energy. Insights from France

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France has launched a vast transformation of its energy system, with the aim of providing affordable, secure and clean energy. This paper focuses on the policy reforms needed to make this transformation a success, including reforms of taxes, public subsidies, and regulation.

  1. France’s electricity system is accessible to all. However, repeated rises in electricity prices have created problems of energy poverty. In addition, the difficulties faced by nuclear and hydroelectric power plants in 2022-2023 have threatened the country’s resilience. The country’s goal of rapid electrification will therefore require substantial investments.
  2. To reduce the high level of emissions from road transport, the adoption of electric vehicles is an important part of the answer. Action is also needed to encourage modal shift toward bicycles, trains and buses.
  3. Reducing housing energy consumption presents a number of challenges. A significant proportion of homes suffer from poor energy efficiency, but renovation work is often ineffective, despite its high cost, particularly for low-income households.

Fiscal policy and regulatory framework reforms would help meet these challenges.

  1. Energy taxation should take greater account of greenhouse gas content. This would encourage the electrification of energy demand by reducing the cost of electricity relative to the price of fossil fuels.
  2. The many tax expenditures benefiting fossil fuels should be gradually eliminated, while protecting households vulnerable to price hikes.
  3. High financing costs are likely to hamper investment in the electrification of the energy system. Part of the solution to reducing these financing costs is to offer public guarantees and subsidize interest rates, as well as EU funding programmes and contracts for difference.
  4. Encouraging solar self-consumption would reduce network costs. Electricity solidarity from the donation of surplus electricity would support acceptability by local stakeholders.
  5. The adoption of electric vehicles by low-income households would benefit from expanding the “leasing social” programme and making used cars eligible to it. This could be financed by making the “bonus écologique” means-tested, or even by abolishing it.
  6. Greater incentives for biking and taking buses over short distances would reduce road congestion and urban pollution. Phasing out tax expenditures that benefit aviation would restore the competitiveness of traveling by train over medium and long distances. Similarly, modal shift toward train would benefit from securing funding to modernise rail infrastructures.
  7. Subsidies for home improvement (MaPrimeRénov’) should be conditional on results, in particular an effective ex-post improvement in energy performance, verified by independent audits.
  8. Lighter regulations to encourage entrepreneurial dynamism and labour market flexibility are essential in the energy conversion sector.