France has limited domestic fossil-energy resources and, as a result, imports most of its oil and natural gas and all of its coal. Nuclear power drives the majority of French energy production and consumption; however, petroleum products still account for about 28% of energy use. All energy products are subject to a standard Value Added Tax (VAT) rate of 20%, with exceptions for some segments of electricity and natural gas supply, which are taxed at 5%. Excise duties are also levied in the form of the TICPE (Taxe intérieure de consommation sur les produits énergétiques) on all sales of oil products at varying rates. Excise duties are “indirect taxes on the sale or use of specific products, such as alcohol, tobacco, and energy. The revenue from these excise duties goes entirely to the country to which they are paid.” France and other EU countries agree to standard rules to apply excise duties in the same way and to the same products everywhere in the Union. The domestic consumption tax on energy products (TICPE) is France’s primary levy on oil products. Parliament sets the rates, which can be adjusted in response to fluctuations in oil prices. TICPE accounts for EUR 25 billion in revenue for the central government and is a powerful tool for energy policy as it can influence product choice.
There are, however, exemptions and refunds on these excise taxes. For example, there is a partial excise tax refund for diesel used in road freight transport, a concession introduced in 1999 to support France’s road freight sector, and a partial excise tax refund for fuel used in agriculture since 2004 for farmers’ purchase of diesel fuel, heavy fuel oil, and natural gas. There is also an overseas tax exemption for motor fuels in place since 2001. Motor fuels consumed in certain French overseas territories, including Guadeloupe, Guyane, Martinique, and La Réunion, are exempt from the final consumption tax in a concession aimed at driving investments in these economically disadvantaged territories. While TICPE is not applicable in France’s overseas departments, these departments are subject to a special consumption tax (TSC) on oil products.
According to the OECD, in 2021, the French government paid EUR 8.41 billion in support for fossil fuels. 93% of total support was given out in tax expenditures, notably Overseas Excise Tax Exemption for Fuels. A much smaller percentage was made as direct transfers in the form of the Energy Solidarity Cheque, Exceptional winter energy solidarity cheque, and petroleum RD&D funding. For example, a “cheque d’Energie (Energy Cheque) is sent yearly to households considered in energy precarity. This cheque is valid for one year and provides EUR 150 per household on average. This amount can be used for two purposes: first, for paying the energy bills such as electricity, gas, domestic fuel, and even wood products, among others. Second, paying bills for energy renovation work or purchasing energy machinery improvements to lodgings.” In addition, the French government most recently introduced an exceptional winter solidarity cheque in December 2021, which provides an additional energy cheque for EUR 100 to economically precarious households in response to increases in energy prices.
Direct transfers have also historically been made to the coal, oil, and gas sector through RD&D funding. In 2020 however, the French government ended all public support for research and development projects around coal and unconventional hydrocarbons. France also pledged to end foreign public financing of coal, oil, and gas projects by the end of 2022 for all projects that do not have greenhouse gas emission mitigation mechanisms. Historically this public financing accounted for EUR 9.3 billion between 2009 and 2019. As of 2021, the overwhelming majority of French support for fossil fuels (97%) went to end-user beneficiaries, while only a tiny percentage (3%) went to firms. Le Monde reported that France’s anachronistic fuel aid is disastrous for public finances and the climate. The article also quipped, however, that “When it comes to addictions, detoxification is a perilous exercise.”
This Post was submitted by Climate Scorecard France Country Manager Liana Mehring
Escande, Philippe. “’France’s Anachronistic Fuel Aid Is Disastrous for Public Finances and the Climate.’” Le Monde.fr, Le Monde, 7 Dec. 2022, https://www.lemonde.fr/en/economy/article/2022/12/07/france-s-fuel-aid-is-disastrous-for-the-climate_6006924_19.html#:~:text=The%20French%20government%20has%20announced,climate%2C%20writes%20columnist%20Philippe%20Escande.&text=When%20it%20comes%20to%20addictions%2C%20detoxification%20is%20a%20perilous%20exercise.
“Excise Duties.” Taxation and Customs Union, https://taxation-customs.ec.europa.eu/taxation-1/excise-duties_en.
“OECD Inventory of Support Measures for Fossil Fuels.” OECD Inventory of Support Measures for Fossil Fuels: Country Notes –, https://www.oecd-ilibrary.org/sites/5a3efe65-en/1/3/18/index.html?itemId=%2Fcontent%2Fpublication%2F5a3efe65-en&_csp_=2ffa7a733148fec42dccf926d7619e1c&itemIGO=oecd&itemContentType=book#:~:text=Government%20support%20to%20fossil%20fuels,to%203%25%20directed%20to%20firms.