France has very limited fossil-energy resources and imports most of its oil, natural gas, and all its coal. The country has pursued a policy of developing its nuclear energy industry to reduce its dependence on fossil energy imports, though almost all the uranium needed to fuel its nuclear power plants is imported (mostly from Canada and Niger). In 2021, nuclear power accounted for roughly three-quarters of France’s electricity generation and 46% of its total energy supply (TES), with fossil fuels accounting for 30% of TES.1 Treating nuclear power as domestic supply, indigenous production meets 40% of the country’s energy use in 2020. Petroleum products accounted for 28.1% of energy use, having dropped steadily from 37% in 1990 and nearly two-thirds in the 1970s.
OECD Inventory of Support Measures for Fossil Fuels: Country Notes
France
Energy resources and market structure
Source: IEA (2022), "World energy statistics", IEA World Energy Statistics and Balances (database).
France has liberalised its electricity and natural-gas sectors progressively to comply with EU directives, eliminating the monopoly rights of the two state companies, Électricité de France (EDF) and Gaz de France (GDF). As a result, high government ownership of energy companies has somewhat diminished in recent years. Further actions taken included the unbundling of the transmission and distribution networks of natural gas and electricity, the introduction of negotiation of third-party access to underground storage of natural gas, and the establishment of both a regulator, the Commission de Régulation de l’Énergie (CRE), and a mediator to protect electricity and gas consumers.
The oil industry has been private since the state divested from the shares of its then international oil company, Total, completed in the late 1990s. Several other private companies, many of them foreign-based multinationals, are also active in the French refining, distribution, and marketing businesses. Despite efforts to liberalise the electricity sector, EDF and its subsidiaries still account for the bulk of power generation, transmission, and distribution. This is reflected by low consumer-switching rates (less than 4%), although electricity consumers in France have been able to choose their supplier since 2000. Similarly, Engie (formerly GDF Suez) remains the dominant player in the natural-gas market, importing the bulk of the country’s gas needs, mainly from Norway, the Russian Federation, Algeria and Nigeria. Engie and other historical gas suppliers have retained most of the retail market (79% of residential customers and 78% of non-residential customers in September 2018, but only 68% of non-residential consumption).
Energy prices and taxes
Prices of all forms of energy other than electricity and natural gas are set freely by the market in France. The CRE is responsible for proposing changes to the regulated tariffs and for regulating tariffs for access by third parties to gas and electricity infrastructure, but the government still has the final say over whether to approve the proposed changes (though not modify them). Energy products and services are subject to normal VAT at the rate of 20% (since 2014), except for some segments of electricity supply, natural gas, and LPG, for which the rate is 5.5%. Oil products consumed in the territorial collectivity of Corsica are taxed at 13% VAT. Specific lower rates also apply in French overseas departments. Excise duties in the form of the TICPE (Taxe intérieure de consommation sur les produits énergétiques) are due on all sales of oil products at varying rates while separate consumption taxes apply to deliveries of coal, natural gas and electricity. A part of this rate is directly linked to the fuel carbon emissions.
Figure 2. Total tax rebates and support for fossil fuels in France
1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports). Support measures for which such information is not available are excluded from the aggregate amount reported in this table. In addition, support measures in certain countries may not have been exhaustively identified.
2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.
3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.
4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.
Source: OECD Inventory of support measures for fossil fuels (2023).
Recent developments and trends in support
There exists several different mechanisms and arrangements supporting the use of specific fuels and categories of end users in France. These mainly take the form of partial or full exemptions and refunds from VAT and excise duties on oil products. In many cases, the total volume of the different forms of support is modest, though it can still represent a substantial transfer from the perspective of the recipient. In 2015, with the addition of a carbon tax to the taxation of energy products in France, exemptions to energy-intensive industries that are not part of the EU ETS and are exposed to the risk of carbon leakage were introduced to shield concerned sectors from increases in excise tax rates on fossil fuels. The resulting generalised upward trend in support to fossil fuels from 2014 to 2021, as illustrated in the graph above, is directly linked to the exclusion of energy-intensive industries from the new carbon tax on fossil fuels.
There are also significant amounts from VAT exemptions for certain petroleum products applicable in overseas French departments (French Guiana, Guadeloupe, Martinique, Mayotte, Reunion Islands) as well as reduced excise tax rates on certain diesel fuel uses.
In response to the spike in fuel prices post-COVID-19, the government has deployed direct fixed transfer programmes to compensating households’ consumers for increases in the energy prices.
Recent data indicate that France’s support measures mostly benefit the transportation (49% of Total Support Estimate ― TSE) and Industrial, Commercial and Agricultural sector (44% of TSE). With the advent of direct covid support measures, support targeting residential sector increased in 2021, at around 7%.
In 2020 the French government ended all public support for research and development projects around coal and unconventional hydrocarbons. More recently, France has 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. Between 2009 and 2019 this support represented EUR 9.3 billion in public finance for oil and gas.
In response to the rise in international energy prices, the French government enacted an Economic and Social Resilience Plan from April 2022.
The Plan encompasses:
Energy affordability measures targeted at consumers: a fuel discount on gasoline, diesel, natural gas, and LPG (Bouclier Tarifaire), subsidies to sectors most exposed to the impact of price hikes such as fishing, agriculture, construction and transport, gas and electricity subsidies for companies for which gas and electricity expenses represent at least 3% of their turnover, state-backed loans for companies most exposed to the crisis effect.
Clean energy and energy efficiency support: increased support to connection fees for biogas plants, from 40% to 60%, launch of a public campaign on energy savings before winter 2022/23, increase in the budget allocated to MaPrimeRénov subsidy scheme for fuel switch in domestic heating systems as well as the Fonds Chaleur scheme targeting community and industry heating systems switch, launch of a new call for tender to support decarbonisation projects in heavy industries, earmarked government investment to improve the energy performance of public buildings.
Measures aimed at strengthening energy security, by filling storage facilities ahead of the winter of 2022 and increasing import capacity for liquefied natural gas (LNG).
The French government enacted in August 2022 the full renationalisation of the utility EDF, to ensure the financial viability of the company and directly oversee the launch of a new nuclear programme. The renationalisation will see the State purchase the totality of the company capital, in which it formerly owned an 83.9% stake, as well as existing convertible bonds.
The fiscal cost of support measures for fossil fuels in France was estimated at EUR 24.12 billion in 2022. Fifty-seven per cent (57%) was directed at end user beneficiaries, as opposed to 43% directed to firms. Support was mainly given out in the form of direct transfers (EUR 17.17 billion) accounting for 71% of the total fiscal cost of support measures. Tax expenditures amounted to EUR 6.95 billion.
The fiscal cost of support measures for fossil fuels has increased by 271% since 2017. Since last year, tax expenditures have increased by 12%, from EUR 6.20 billion to EUR 6.95 billion and direct transfers increased by 4365%, from EUR 2.69 billion to EUR 17.17 billion. All growth rate percentages above are expressed in terms of nominal national currency amounts.
Table 1. Fiscal cost of support measures for fossil fuels (in billions of national currency)
|
|
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
|---|---|---|---|---|---|---|
|
Tax expenditures |
6.458 |
8.483 |
8.582 |
6.326 |
6.201 |
6.953 |
|
Direct transfers |
0.045 |
0.242 |
0.352 |
0.332 |
2.690 |
20.783 |
|
Total |
6.503 |
8.725 |
8.934 |
6.657 |
8.891 |
27.736 |
1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports). Support measures for which such information is not available are excluded from the aggregate amount reported in this table. In addition, support measures in certain countries may not have been exhaustively identified.
2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.
3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.
4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.
Source: OECD Inventory of support measures for fossil fuels (2023).
Table 2 highlights a selection of support measures associated with a large fiscal cost. A description of these measures is provided in Table 3.
Table 2. Selected support measures for fossil fuels with a large fiscal cost (in billions of national currency)
|
Measures associated with large fiscal cost in 2022 |
2022 |
2017 |
Variation since 2017 |
|
|---|---|---|---|---|
|
Tax expenditures |
|
|||
|
Overseas Excise Tax Exemption for Fuels |
1.511 |
1.062 |
0.449 |
|
|
Excise Tax Refund for Fuel Used in Agriculture |
1.351 |
0.192 |
1.159 |
|
|
Excise Tax Refund for Diesel Used in Road Freight Transport |
1.247 |
0.645 |
0.602 |
|
|
Direct transfers |
||||
|
Temporary cap on the regulated price of gas |
6.700 |
(Started in 2022) |
6.700 |
|
|
Exceptional aid for carburant acquisition |
5.832 |
(Started in 2022) |
5.832 |
|
|
A one-off subsidy to fuels |
4.900 |
(Started in 2022) |
4.900 |
|
1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports).
2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.
3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.
4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.
Source: OECD Inventory of support measures for fossil fuels (2023).
Table 3. Description of selected support measures for fossil fuels
|
Overseas Excise Tax Exemption for Fuels |
Motor fuels consumed in certain French overseas territories or départements (Guadeloupe, Guyane, Martinique, and La Réunion) have been exempted since 2001 from the final consumption tax. This concession is meant to drive investments in those French territories that are both geographically and economically disadvantaged. Data from the Direction Générale des Douanes et Droits Indirects (DGDDI, Directorate General for Customs and Indirect Duties) on annual imports of petroleum products into Guadeloupe, Guyane, Martinique, and La Réunion are used for allocating the overall expenditure to the different motor fuels. |
|
Excise Tax Refund for Fuel Used in Agriculture |
Since 2004, Farmers’ purchases of diesel fuel, heavy fuel oil, and natural gas have been subject to partial refunds of the excise tax that is normally levied on most sales of energy products in France. Refunds are worth EUR 5 per hectolitre for diesel fuel, about EUR 2 per 100 kg for heavy fuel, and roughly EUR 1.3 per MWh for natural gas. This measure is additive to the lower rate of excise tax that farmers already enjoy for diesel fuel used off roads. The present refunds explicitly seek to help the agricultural sector cope with high energy prices. Although refunds were initially meant to be both discretionary and transitory, they have been reinstated every year since their first inception in 2004 and were again voted in 2014. |
|
Excise Tax Refund for Diesel Used in Road Freight Transport |
The excise tax levied on diesel fuel used in road freight vehicles weighing at least 7.5 tonnes is, under this tax provision, partly refunded to eligible beneficiaries. This concession was introduced in 1999 to support France’s road freight sector. Freight companies registered in other EU countries can benefit from this measure provided they are able to attest having purchased diesel fuel in France for use in eligible vehicles. |
|
Temporary cap on the regulated price of gas |
Prime minister Jean Castex announced a cap on the regulated price of gas until April 2022. The measure was then strengthened on 21 October as the price cap was extended to the end of 2022. |
|
Exceptional aid for carburant acquisition |
This measure is in response to the increase in the fuel price of Q1 of 2022 by offering a reimbursement of EUR 0.15/litre of gasoline, super-ethanol, or ethanol diesel and of EUR 15/MWh for natural gas, LNG, and EUR 29.13/100kg of LPG purchased. The discounts will be in effect from 1 April to 31 July 2022, and applied directly at the pump, later reimbursed by the government. Given the financial pressure that this discount can represent for the small-scale petrol station operators in the short run, an advanced payment of EUR 3000 is provided. |
|
A one-off subsidy to fuels |
A one-off subsidy of 30 cents per litre from September to October 2022 and 10 cents per litre from November to December 2022. |
Data sources
Note on the Methodology
Aggregate numbers from the Inventory represent the fiscal cost of support measures for fossil fuels. They should not be interpreted as a level of support for fossil fuels, nor as an indicator of the extent to which the considered policies are favourable or unfavourable to climate mitigation.
The Inventory reports tax expenditures as estimates of revenue foregone due to measures that reduce or postpone tax payments relative to a jurisdiction’s benchmark tax systems to the benefit of fossil fuels producers or users. Tax expenditure estimates can thus increase over time due to either an increase in the offered concession (relative to benchmark tax systems) or an increase in the benchmark itself. Cross-country comparisons of tax expenditures can also be misleading due to differences in countries’ benchmark tax systems.