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19 January 2015

Carbon: a fair price to save the climate


François Hollande clearly stated it last week: he wants to set up “innovative financing instruments, especially regarding carbon pricing, in the light of of the COP21 “. A salutary decision considering that the national law for energy transition doesn’t include, at this stage, any measure to ensure a strong CO2 price, to foster the adaptation of EU industries to low-carbon technologies. Nevertheless, if France wants to be exemplary in the fight against climate change, it must establish a consistent low carbon strategy, supported by an incentive CO2 price…

Therefore, France could benefit from the Sweden case. This country, which has well integrated the economic principle of scarcity price, is one of the few countries in Europe to have built his entire energy and climate strategy around the concept of low-carbon economy and industry. And the first driver has been, from the beginning, a high CO2 price per ton (120 € / t.CO2), to encourage the investments of businesses in low-emission technologies. Coupled with a power generation park based on hydropower, nuclear and renewables, and with an increasing fossil fuel substitution policy (towards electricity and non-electric renewables), this approach endows Sweden with a decarbonized energy mix of 61%.

France, soon an “example”?

If Sweden reached this target, there is no reason that France could not. Nothing is impossible in this field if the political will is present, and if the roadmap is clear, legible and durable. In this sense, the recent remarks of the President of the Republic went in the right direction, provided that those won’t remain at the stage of a “declaration of intent”. The implementation of policies to fix a genuine CO2 price signal must also be consistently planned, and developed beyond the simple goal of appearing “exemplary” at the next climate summit in Paris. A first step has been made through the French Finance Act which states that, as a part of the climate-energy contribution, the price of a ton of CO2 will increase from € 14.5, currently, to € 22 next year, and should rise again in the following years. In fact, a gradual approach will allow companies to adapt without “strangling” them with a taxation system that could otherwise be perceived as “punitive”.
But beyond the introduction of an incentive carbon price in the taxation system, we cannot avoid a deep structural reform of the European exchange market of CO2 quota (EUETS).The European Commission understood it, and it has launched, in mid-March, a major consultation on the ETS, in which UFE will actively contribute.

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