Climate change taxation reforms and incentives in France

Yes, on October 6, 2016. 

The Domestic Consumption Tax on Energy Products ("Taxe interieure de consommation sur les produits énergétiques" or "TICPE"), based on the volumes of fuel, gas, fuel oil and coal consumption, is among the most important environmental taxes in terms of revenues (over €25 billions). Technically, the TICPE is an indirect tax.

Electrical energy is also taxed as such, via local taxes and especially the domestic tax on final consumption of electricity ("Taxe intérieure sur la consommation finale d'eléctricité" or "TICFE"). This tax is intended to finance the costs of policies to support cogeneration and renewable energy, additional production costs in areas not interconnected to the metropolitan continental power grid and the implementation of social tariffs (special pricing for "products of basic necessities"). The revenue generated by this tax exceeds € 3 billions.

A malus applies on the purchase and possession, by companies and households, of the most CO2 emitting vehicles. This malus may also apply on the use of these vehicles by companies. Companies have also to pay an annual tax, namely the tax on company vehicles (“taxe sur les véhicules de sociétés” or “TVS”).

Another interesting transport tax is the air ticket solidarity tax ("taxe de solidarité sur les billets d'avion" or "TSBA"). This tax, also known as the "Chirac tax", was created in 2005. It is an additional tax to the civil aviation tax payable by companies in the public aviation sector.

As previously mentioned, a malus applies on the purchase and possession, by companies and households, of the most CO2 emitting vehicles. This malus may also apply on the use of these vehicles by companies. Besides, CO2 emissions of energy producers and industrial sectors are regulated under the CO2 trading scheme, which forces operators who have exceeded their assigned emissions quota to acquire additional emission rights on the market or from another operator who has not exhausted its emission rights. Emissions of greenhouse gases other than CO2 (nitrous oxide, methane, nitrous oxide gas, methane gas, etc.) are not currently taxed.  

Pollution emitted into the air, land or sea water and into the soil is taxed in different ways. Land-based water pollution is subject to charges levied by the water agencies. Their cumulative amount exceeds €1.5 billion annually. Air pollution caused by industry is subject to the general levy on activities ("Taxe générale sur les activités polluantes" or "TGAP") perceived by the customs department, which targets in particular household and industrial emissions into the atmosphere of polluting substances (sulphur oxides, hydrochloric acid, nitrous oxide, oxides of nitrogen in particular), oils used as lubricants, detergents, extraction materials and printed matter (overall revenue of 0.5 bn €).

Resources taxes are taxes on aggregates, fees on water withdrawals and hydroelectric activity, or fees on oil and gas extraction. 

Besides, in application of the principle of "producer responsibility", manufacturers, importers or distributors of certain products such as household packaging, equipment, electrical appliances and batteries, have to pay a contribution which is intended to finance the separate collection and the recycling or treatment of waste from these products. Taken together, these contributions amount to approximately €1 billion.

There is no separate carbon tax.

Subsidies (tax credits, tax reductions, bonuses, etc.) are allocated to individuals and companies who take initiatives that have a positive impact on the environment.

For instance, a tax credit is granted to individuals who carry out work to improve energy performance in their dwelling or install equipment using renewable energy sources in their dwelling.

The most recent French finance bill enlarged the mechanism of accelerated depreciation for energy-efficient and renewable energy property (so-called suramortissement). 

Regarding individuals, the energy transition tax credit (CITE) was revoked and replaced by a premium granted under restricted income conditions. 

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