France Subsidies

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Fossil fuel subsidies (excluding tax advantages on Diesel) in France accounted for €1.41 Billion in 2017 down from €3.42 Billion in 2014.

The total, including advantages on Diesel, accounts for €7-10 Billion a year. These subsidies mainly consist of tax exemptions / fiscal gifts on the one hand and, direct budget transfer / support on the other hand. For instance, VAT on gas in French Overseas Territories is 13% compared to 20% in mainland France. In the same way, the airline industry benefits from tax exemption on kerosene for domestic flights. On the other hand, direct budget support is relatively limited compared to tax exemptions and mainly consists of direct support to independent gas stations located in remote areas in France.

The Climate-Energy Contribution, aka Carbon Tax, was one of the key tools/policies enacted by the French Government in 2014. Its key strength is believed to be its ability to take into account / measure Carbon, i.e. to gradually enable Carbon pricing and reduce tax benefits / exemptions for fossil energies. For instance, the fiscal advantages / benefits on Diesel alone account for €5 to 6 Billion (often seen as a fiscal niche – not taken into account in the figures cited earlier in the article, i.e. the total fossil fuel subsidies, including tax advantages on Diesel, would reach €8 to 10 Billion). The 2016 draft Budget Bill is another essential policy that will, once enacted, upgrade and speed up the Climate-Energy Contribution until 2020, by gradually reducing tax advantages on Kerosene for example.

In terms of areas of improvement, experts estimate there are several types of subsidies that need to be reviewed and possibly eliminated. For instance, gradually reducing the tax advantages granted to road transporters could help finance and upgrade public rail infrastructure. Furthermore, the IMF and the OECD clearly advised governments to take advantage of the low prices of fossil fuel/energies and see it as an opportunity to implement taxes and eliminate subsidies without too much risking to antagonise / upsetting populations. Nevertheless, countries, including France, are still failing to accelerate the move and engage in large scale initiatives aimed at reducing or even eliminating fossil fuel subsidies.

Advocacy efforts are, therefore, necessary in this context, be it from NGOs and independent organisations and/or from other stakeholders, including public decision-makers, in order to engage in serious/long-term initiatives that will help reduce fossil fuel subsidies and ultimately reduce the impact on climate and climate change.

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