Machine Translated by Google CLIMATE POINT N°56 The Climate Energy Contribution in France: operation, income and exemptions Paris, October 2018 Authors: Lucile Rogissart | Sebastien Postic | Julia Grimault RÉSUMÉ • The energy climate contribution (CCE) is not a tax strictly speaking but a way of calculating domestic consumption taxes (TIC), proportional to the CO2 content of energy products. This definition responds to the desire to introduce exemptions for certain sectors. After several increases in its trajectory, the CCE is now set at 44.6 EUR/tCO2 . • CCE revenue represented 6.4 billion euros in 2017. Part of the associated ICT revenue is directly earmarked for the financing of renewable energies via a special energy transition account (CAS TE). • Several sectors and uses benefit from exemptions on the payment of ICT – total exemptions or reimbursement. Some of these exemptions are made compulsory by a European directive currently being revised, but a majority are defined at national level. • These French exemptions generate significant and growing public expenditure that is inconsistent with French climate objectives. The expenditure associated with these exemptions would be 6.9 billion euros in 2018, an increase of 15% compared to 2017. • Reducing the number of exemptions is necessary for the implementation of a tax coherent energy from an environmental point of view and in terms of a balanced budget. The gradual abolition of these exemptions will not be possible without the joint implementation of support measures for the sectors concerned. 1. From the carbon unanimously, was refused. In 1995 and 1997, two even more flexible projects did not manage tax to the CEC: to obtain unanimity either. genesis, operation European carbon pricing has finally moved towards an allowance trading market. and amount In France, the first attempt to introduce a carbon tax dates back to 2000: it was then a A. A genesis complicated by the matter of extending the scope of the general tax With the support of : desire to allow exemptions on polluting activities (TGAP) to electricity, natural In the 1990s, several EU-wide carbon tax gas and coal in particular 1. The draft law was proposals were made. In 1992, a first proposal censured by the Constitutional Council for breach was presented by the Commission, taking into of equality before taxes, the exemptions being account both the emissions and the carbon considered contrary to the objective of reducing content of energy products, and including CO2 emissions (see box opposite). numerous exemptions. The project, which was to be adopted 1 Amended finance bill for 2000. Climate Update n°56 – The Climate Energy Contribution in France: operation, income and exemptions – I4CE | 1 Machine Translated by Google Nine years later, at the end of the Grenelle de l'Environnement PRINCIPLE OF EQUALITY BEFORE TAX and to support the national objectives of reducing GHG AND ENVIRONMENTAL TAXATION emissions, a "carbon tax" was voted in Parliament in the finance bill (PLF) for 2010. The text plans to tax energy The principle of equality before the tax consists of a fair products in proportion to their carbon dioxide content at a distribution of the public contribution to the tax between level of 17 EUR/tCO2 . This project also included numerous citizens, and therefore prohibits too many exemptions. exemptions, and was again censored by the Constitutional This principle generally applies to yield taxes, that is, Council on the same grounds as in 2000. taxes whose sole purpose is to generate tax revenue. Differential treatment can only be accepted if it contributes It was finally in 2013, in the PLF for 2014, that a carbon to the pursuit of the general interest. These exceptions tax was adopted in the form of a “climate energy relate in particular to environmental taxes: taxes intended contribution”. to trigger a change in behavior as defined by the French State – although no definition of such a tax appears explicitly in the legal texts. The Constitutional Council B. How does it work? therefore requires that the terms of exemption from an In order to allow exemptions while avoiding a breach of environmental tax be in line with the objectives pursued. equality before the tax, the CCE was not defined as an environmental tax but as a contribution backed by a yield tax. The CCE is thus a way of calculating three of the four domestic consumption taxes (TIC): the domestic consumption tax on energy products (TICPE), the domestic C. A trajectory raised several times tax on the consumption of natural gas (TICGN), and the domestic tax on coal consumption (TICC). The 2014 text initially provided for a price of 7 EUR/tCO2 , which would gradually increase to 22 EUR/tCO2 in 20162 . The domestic tax on final electricity consumption (TICFE) is This trajectory has since been enhanced twice (Figure 1): not affected by the CCE. The amount of these three TICs is 1. By the Law on energy transition for green growth thus defined by a carbon component proportional to the CO2 (LTECV) which provides for the CCE to reach 100 EUR/ content of the product, to which is added a fixed part. tCO2 in 2030. The resulting increase in the energy bill (-83 EUR/year per household) was however more than offset The CCE is paid by households and businesses by a concomitant fall in energy market prices (+450 EUR/ at the time of purchase of products used as fuels or in the year per household) between 2013 and 20163 . production of electricity by the three ICTs mentioned. The rates are defined at the national level but Corsica and the 2. By the PLF for 2018 which again raises the trajectory with overseas departments benefit from reduced rates while the a price of 44.6 EUR/tCO2 in 2018 and targets 86.20 EUR/ rates are increased in Ile de France. tCO2 in 2022. FIGURE FIGURE 1. EVOLUTION 1. EVOLUTION OF OF CCECEC TRAJECTORIES TRAJECTORIES (IN (IN EUR/TCO) 2) EUR/TCO2 100 90 Initial trajectory (2014) 80 70 60 50 First revision (2015) 40 30 20 10 Second revision (2017) 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source : I4CE 2 All CCE prices are expressed exclusive of value added tax. 3 National Assembly (2013) Finance bill for 2014. 2 | I4CE – Climate update n°56 – October 2018 Machine Translated by Google the convergence measures between diesel and gasoline in the 2. What is CEC revenue used for? PLF for 2018 would increase TICPE revenue by 3.7 billion euros. At the same time, the expenditure for the two compensation measures put forward by the Government would increase by only The CCE brought in about 6.4 billion euros in 2017 and the 181 million euros in all (100 million more for the vehicle conversion rise in the trajectory is expected to generate 2.7 billion euros in premium, and 81 million more for the generalization of energy additional revenue for the state in 2018, reaching up to 10.8 billion check). It would therefore be missing 3.5 billion euros to euros. euros in 2022. compensate for the increase in the tax burden on energy products. It is not possible to precisely monitor the use made of CEC revenue due to the principle of non-assignment of budgets and due to the very nature of the carbon component. The CCE is indeed a mode of calculation of the TIC and not a levy in its own 3. Numerous exemptions right. Income from the TICPE, on the other hand, is subject to strict and soft marking. A. Some exemptions are made mandatory by the European Union but a majority are A. Strict signage decided at national level A European directive from 20038 – currently being revised – Part of the TICPE revenue is allocated to a special "energy sets minimum levels of taxes on energy products and transition" account. (CAS TE), an exception to the principle of non-assignment of is electricity and provides a framework for exemptions from these same taxes. budgets. This account, created in 20154 intended to finance , These exemptions can take the form of either a total exemption renewable energies5 as well as reimbursing the State's debt to EDF. The CAS TE is mainly financed by the TICPE (7.2 billion or a refund of part of the tax. This directive imposes certain euros) and more marginally by the TICC (1 million euros) and exemptions while leaving Member States the possibility of totally or partially exempting certain uses, products or sectors. It income from the auctioning of guarantees of origin for electricity renewable (17 million euros)6 . nevertheless appears that a large part of the exemptions in force in France have been defined at the national level (Figure 2). B. Soft signage The remainder of the TICPE's revenue is not explicitly earmarked B. Exemptions defined at the national for specific public expenditure, but certain measures are intended level: justifications, cost and emissions to compensate for its levies. Nationally defined exemptions consist of TIC refunds. They The LTECV stipulates that “the progressive enlargement of the therefore generate gross tax expenditures, although the overall carbon share [is] compensated, proportionally, by a reduction in taxation weighing on other products, works or income”. In 2016, net revenue from these ICT9 is positive. Total gross expenditure this principle of compensation was applied since 3 billion euros related to the TICPE10 were made available to companies in the form of tax credit for competitiveness and employment (CICE) and 1 billion euros to are expected to reach 6.9 billion euros in 2018, an increase of households under the form of reduced rates of value added tax 15% compared to 2017 or almost double the expenditure of (VAT) on energy renovation works. 2014. In 2018, on the other hand, the gap between revenues and compensatory measures on energy products will widen according to the opinion of the Senate Economic Affairs Committee on the PLF for 20187 . The enhancement of the CEC as well as 4 I4CE (2018) Global carbon accounts in 2018. 5 Amending finance law no. 2015-1786 of December 29, 2015 for 2015. PLF 2018 - extract from the budget blue of the mission: energy transition, program 764: support for energy transition. 8 Council Directive 2003/96/EC (2003) restructuring the Community framework for the 6 Report no. 273 made on behalf of the Committee on Finance, General Economy taxation of energy products and electricity. and Budgetary Control on the finance bill for 2018, TOME II, Examination of 9 Difference between net revenue due to levies of taxes and gross expenditure due to the first part of the finance bill, 692-693 . refunds. 7 Opinion presented on the finance bill for 2018, Ecology, sustainable development and 10 Which also include advantageous rates for Corsica and the Overseas Territories for mobility (energy), Volume II. example. Climate Update n°56 – The Climate Energy Contribution in France: operation, income and exemptions – I4CE | 3 Machine Translated by Google FIGURE FIGURE 2. 2. OVERVIEW OVERVIEW OF OF EXEMPTIONS EXEMPTIONS OF OF EUROPEAN EUROPEAN AND AND FRENCH FRENCH ORIGIN ORIGIN Exemptions Transport of goods on tracks mandatory inland waterways International air and maritime transport at the level Firewood, double products (goods, people, services) community use, non-metallic mineral products… Air Transport Road public transport Energy-intensive Exemptions and inland maritime in common of travelers installations (goods, people, authorized by the EU (subject to the EU services) ETS or exempted for Taxi operators and defined risk of carbon leakage) on a national level Exemption on Agricultural professionals the TICGN Truck transport Off-road diesel merchandise Total exemption Partial refund Source: I4CE according to Directive 2003/96/EC, Articles 265 B, 265 C, 265 Bis, 265 sexies, 265 septies and 265 octies of the Customs Code, and Article 32 of Law No. 2013- 1837 of December 29, 2013 of finances for 2014 For each of these exemptions currently in effect, this section • The economic justification : the economic justifications for stipulates: the current exemptions are mainly explained in a 2009 report • Gross tax expenditure: these are projections for 2018 of tax by ADEME and MEEDDAT. This report simulated the expenditures associated with ICT reimbursements11 . ÿ introduction of a carbon contribution of 32 EUR/tCO2 added Figure 4 to the existing TIC. The results are mainly expressed in terms of loss of value added (VA) and gross operating surplus • The unit amount reimbursed: this is the amount of the (EBITDA) of companies, but also sometimes in terms of loss tax which is reimbursed by the State, expressed in euros per of competitiveness. The report only specifically covers tonne of CO2 . ÿ Figure 5 transport and agriculture. Non-road diesel is not covered and • The effective price: this is the amount of the tax actually paid installations subject to the European quota market (EU ETS) (after reimbursement) by the taxpayer, expressed in euros per are excluded. A general recommendation of this report is ton of CO2. This indicator makes it possible to compare the to favor compensation approaches rather than exemptions, price actually paid independently of the energy product used in order to maintain the price signal. ÿ Picture 7 (diesel, natural gas, etc.). ÿ Figure 5 • Associated CO2 emissions : this is the carbon footprint of reimbursements, expressed in MtCO2 . It is obtained by These different elements are not reported for domestic air and dividing the gross tax expenditure (in euros) by the unit amount maritime transport, given the impossibility of distinguishing the reimbursed (in euros per tCO2 ). By way of comparison, total expenses associated with domestic and external journeys. The CO2 emissions in France were 340 Mt in 201612. ÿ Figure 6 various reimbursement measures are listed in descending order of tax expenditure, and figures in the Appendix allow their 11 Evaluation of Ways and Means, Volume II. comparison. 12 CITEPA (2018) National inventory report for France under the CCNUCC. Non-road diesel (GNR) Gross tax expenditure 2 billion euros Reimbursed unit amount 128 EUR/tCO2 Actual price 59ÿEUR/tCO2 Associated CO2 emissions 15.4 MtCO2 Economic rationale Not covered by the ADEME and MEEDDAT report Additional Information The PLF for 2019 provides for the abolition of the reimbursement of the TICPE on non-road diesel for certain uses. Uses in the building sector are mainly targeted, while the agricultural and railway sectors would retain their reduced rate. This measure is expected to reduce gross expenditure by 900 million euros*. * Context (2018) Document – Energy: The content of the finance bill for 2019 4 | I4CE – Climate update n°56 – October 2018 Machine Translated by Google Road freight transport (TRM) Gross tax expenditure €1.1 billion Reimbursed unit amount 51 EUR/tCO2 Actual price 137ÿEUR/tCO2 Associated CO2 emissions 22.2 MtCO2 Economic rationale According to the ADEME MEEDDAT report, a CCE would have a strong negative impact on TRM in terms of losses of VA and EBITDA but relatively weak in terms of competitiveness. The introduction of the measure could also encourage (i) a modal shift towards the least emitting types of transport and (ii) the exploitation of the potential for energy savings. Despite these two expected effects, the authors recommend measures to limit the negative economic impacts. These recommendations were generally accepted given the exemptions in force. Additional Information With the increase in the trajectory of the CCE, if the regulations remain unchanged in the years to come, the proportion of TICPE reimbursed could reach 45% in 2022 (Figure 3) against 27% today. FIGURE 3. EVOLUTION EVOLUTION OF THE OF THE RATE RATE OF REIMBURSEMENT OF REIMBURSEMENT OF THE OF THE TICPE TICPE ON ON DIESEL DIESEL FOR FOR TRUCKS FIGURE 3. TRUCKS 100 50% 45% 43% 80 38% 40% 33% Adoption 27% 60 of the CEC 30% 40 20% 19% 19% 13% 12% 11% 20 9% 9% 9% 9% 9% 9% 9% 9% 9% 10% 5% 5% 0 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Part not reimbursed (in EUR/hL) Share reimbursed (in EUR/hL) Part not reimbursed if unchanged post 2018 (in EUR/hL) Trajectory of the TICPE post 2018 (in EUR/hL) Reimbursement rate of the TICPE (in %) Source: I4CE based on current and previous versions of Article 265 Bis of the Customs Code Agricultural professionals Gross tax expenditure 197 million euros Reimbursed unit amount 46 EUR/tCO2 Actual price 2ÿEUR/tCO2 Associated CO2 emissions 4,3 MtCO2 Economic rationale According to the ADEME and MEEDDAT report, the impact of a CCE on the agricultural and fish farming sector would be limited on average, but livestock farming and market gardening would be particularly affected. Moreover, the low expected revenues and the generation of environmental services by the sector led the authors to recommend special measures. Joint public road passenger transport (TPRCV) Gross tax expenditure 182 million euros Reimbursed unit amount 64 EUR/tCO2 Actual price 124ÿEUR/tCO2 Associated CO2 emissions 2,8 MtCO2 Economic rationale These transports would be moderately affected by the introduction of a CCE according to ADEME and MEEDDAT, but would potentially be threatened by a deterioration in their competitiveness. Climate Update n°56 – The Climate Energy Contribution in France: operation, income and exemptions – I4CE | 5 Machine Translated by Google Taxi operators Gross tax expenditure 42 million euros Reimbursed unit amount 104 EUR/tCO2 Actual price 112ÿEUR/tCO2 Associated CO2 emissions 0,4 MtCO2 Economic rationale According to the ADEME and MEEDDAT report, taxi operators would be relatively protected from the introduction of a CCE in terms of VA and EBITDA. Despite this conclusion, taxi operators benefit from a partial refund on the TICPE. Energy-intensive installations (IIEE) excluded from the EU ETS – reimbursement on the TICGN Gross tax expenditure 22 million euros Reimbursed unit amount 37 EUR/tCO2 Actual price 7ÿEUR/tCO2 Associated CO2 emissions 0,7 MtCO2 Economic rationale These facilities were excluded from the EU ETS because they were too small, and were excluded from the scope of the ADEME and MEEDDAT simulation due to a high risk of carbon leakage. The abolition of these exemptions is necessary on the This need to cover all emissions one hand to bring public expenditure into line with French by a significant carbon price is notably mentioned in the objectives and on the other hand to preserve the price recent report of the Committee for the Green Economy13. signal. As presented in this section, the partial reimbursement The authors recommend the start of work by the end of 2018 of the TICPE on non-road diesel and on diesel for road freight transport are particularly costly. The PLF for 2019 plans to concerning the compensatory measures to be adopted for partially remove the first of these two exemptions. the sectors benefiting from exemptions. The gradual repeal of these exemptions will nevertheless have to go through the implementation of new compensatory measures adapted to the sectors and aligned with French climate objectives. Indeed, some of these exemptions follow the identification of economic vulnerabilities in certain sectors, or a risk of carbon leakage. A compensatory measure would thus make it possible to attenuate the depressive effect of a tax on production while preserving the associated environmental incentive. In the past and in a different context, the CICE or the vehicle conversion premium played this role, for example (see part II.B). 13 Peyrol and Bureau (2018) How to build environmental taxation for the five- year period after 2022. 6 | I4CE – Climate update n°56 – October 2018 Machine Translated by Google Annex – Figures FIGURE 4. GROSS EXPENDITURE ASSOCIATED FIGURE 5. TOTAL AMOUNT OF ICT, BREAKDOWN WITH FIGURE 4. ASSOCIATED GROSS WITH EXPENDITURE ICT REIMBURSEMENTS FROM FIGURE 5. ACTUAL TOTAL PRICE ANDAMOUNT OF ICT, UNIT REIMBURSED BREAKDOWN AMOUNT INTO IN ACTUAL 2014 2014TO TO2017 2017WITH ICT REIMBURSEMENTS AND PROJECTION FROM FOR 2018 AND PRICE AND CARBON IN REIMBURSED UNIT 2018 PER TONNE OFAMOUNT CARBONPER TONNE OF IN 2018 PROJECTION FOR 2018 2 500 60 % 250 50 % 2 000 200 40 % 30 % tCO2) EUR/ Rate (in 1 500 150 20 % Expenditure growth rate expenditure millions euros) Gross (in of 10 % 1 000 100 0% -10 % 500 50 -20 % 0 GNR TRM -30 % 0 GNR TRM TPRCV TPRCV Taxi operators IIEE subject to the EU ETS Agricultural professionals IIEE subject to EU ETS IIEE exempt from EU ETS Taxi operators - medium Agricultural professionals - medium 2014 2017 2018 Growth rate 2017/2018 Actual price Reimbursed unit amount Source:I4CE Source: I4CEfrom fromWays Waysand andMeans Means2018 2018Volume VolumeIIIIand andWays Waysand andMeans Means Source: Source: I4CE I4CE according according to to Article Article 265 265 of of the the Customs Customs Code, Code, Article Article 32 32 of of the the law finance law for 2016Tome 2016 TomeIIII 2014 and the Base Carbone of ADEME finances for 2014 and the Base Carbone of ADEME Reading: TRMs pay 188 EUR/tCO2 in TICPE and are reimbursed Reading: have TRMs pay 188 137 EUR/tCO2 EUR/tCO2 in TICPE and are reimbursed 51 EUR/tCO2 , so they still to pay 51 EUR/tCO2 , so they still have 137 EUR/tCO2 to pay FIGURE 6. ASSOCIATED CO2 EMISSIONS FIGURE 7. POTENTIAL VA AND EBITDA LOSSES TO ICT REIMBURSEMENTS FIGURE 6. ASSOCIATED IN CO22018 EMISSIONS FIGURE LINKED 7. TO POTENTIAL VA ANDTAX AN ADDITIONAL EBITDA LOSSES AT 32 LINKED EUR/TCO2 TO ICT REIMBURSEMENTS IN 2018 TOINAN 2009 ADDITIONAL TAX OF EUR 32/TCO2 IN 2009 25 10 % 20 8% 15 6% Associated emissions MtC O2) (in 10 4% 5 2% 0 GNR TRM 0% TPRCV TRM TPRCV Taxis Agricuture Taxi operators Loss of VA IIEE subject to the EU ETS Agricultural professionals IIEE exempt from EU ETS Loss of EBITDA SophieBerlioz.fr production: Creation- Source: I4CE from Ways and Means 2018 Volume II, Article 265 of the Code Source: I4CE according to ADEME and MEEDDAT (2009) Source: I4CE from Voies et Moyens 2018 Tome II, Article 265 of the Customs Code, Source: I4CE according to ADEME and MEEDDAT (2009) Finance Law for 2014 and Base Carbone of ADEME Customs, Finance Law for 2014 and Base Carbone of ADEME Read I4CE - Institute for Climate Economics 24 avenue Marceau, 75008 Paris this note www.i4ce.org | contact@i4ce.org | @I4CE_ on > i4ce.org Association governed by the law of July 1 , 1901. 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