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UPDATE 2-France raises carbon taxes, to repay EDF renewables debt
September 27, 2017 / 12:43 PM / 3 months ago

UPDATE 2-France raises carbon taxes, to repay EDF renewables debt

* French budget ramps up carbon tax rises

* Taxes on fossil fuel to fund support for renewables

* State to pay back debt to EDF over renewables (Adds budget impact, analyst comment, EDF debt and share price)

By Bate Felix and Geert De Clercq

PARIS, Sept 27 (Reuters) - France plans to increase carbon taxes to boost support for renewable energy and will repay a longstanding renewables-related debt to utility EDF, the government said on Wednesday.

The government’s 2018 draft budget set a trajectory for higher carbon taxes on fossil fuel - part of a tax on transport and heating fuels paid by all consumers - but again exempted companies’ CO2 emissions.

The budget specified that utilities and other firms with high carbon emissions which operate with greenhouse gas emissions quotas or are exposed to international competition will not have to pay these taxes. Trucking and taxi companies, as well as agriculture are also exempt.

“Support for renewable energy ... will be increasingly financed by a tax on fossil fuel consumption,” the environment ministry said in a statement.

The carbon tax will increase from 30.50 euros ($35.81) per tonne this year to 44.6 euros in 2018, 55 euros in 2019, 65.40 euros in 2020, 75.80 euros in 2021 and 86.20 euros in 2022. There was no mention of a target level for 2030.

Under an energy transition law in 2015, French CO2 taxes were set to increase to 39 euros in 2018, 47.5 euros in 2019, 56 euros en 2020 and 100 euros in 2030.

The higher carbon tax, along with a tax increase on diesel, will boost the price of petrol by 3.9 euro cents per litre and the price of diesel by 7.6 euro cents per litre in 2018. The measures are expected to raise 3.7 billion euros next year.

“A carbon tax increase of this magnitude is a strong signal that the French government is serious about climate and prepared to take unpopular decisions,” independent energy consultant Thibault Laconde said.

He added that while utilities would still pay for carbon emissions under the European Union Emissions Trading System, it was worrying that taxis, truckers and farmers remained exempt.

The ministry also said the government planned to spend 18.2 billion euros ($21.38 billion) in the next three years to boost the development of renewable energy projects: 5.5 billion euros in 2018, 6.2 billion in 2019 and 6.5 billion in 2020.

France needs to increase renewable energy capacity as it plans to reduce the share of nuclear in power production from 75 percent to 50 percent by 2025. This could mean closing up to a third of its 58 nuclear reactors.

The government also plans to reimburse longstanding renewable-energy related debts to EDF.

A government source told Reuters the state planned to pay EDF 1.6 billion euros in 2018 and the rest of the 4.6 billion euro debt by 2020.

For years, state-owned EDF has been forced to buy power at subsidised tariffs from renewable energy producers. The difference between subsidised and market prices was supposed to be financed via the so-called CSPE tax that power users pay.

But as renewable energy capacity grew more quickly than the CSPE tax, the shortfall was financed by EDF and built up as debt in its balance sheet. At the end of 2015, the previous government admitted a 5.9 billion euro debt to EDF and put in place a reimbursement scheme.

EDF shares recovered from early losses on the news and closed virtually unchanged. ($1 = 0.8517 euros) (Reporting by Geert De Clercq, Bate Felix and Simon Carraud; Writing by Geert De Clercq; Editing by Jane Merriman and Adrian Croft)

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