French Carbon Pricing

The French Carbon Tax (Taxe Carbone)

France introduced a carbon tax, formally known as the Contribution Climat-Énergie (CCE), under the Loi de Finances pour 2014 (Law No. 2013-1278 of 29 December 2013). The tax is codified in Article 265 of the Code des douanes, which imposes an excise duty on fossil fuels proportional to their carbon content. The carbon component is integrated into the existing Taxe Intérieure de Consommation sur les Produits Énergétiques (TICPE), creating a single tax instrument that reflects both energy and carbon content.

The CCE was initially set at €7 per tonne of CO₂ in 2014, with a legislated trajectory designed to reach €100 per tonne by 2030. The trajectory increased steadily: €14.50 in 2015, €22 in 2016, €30.50 in 2017, €44.60 in 2018, and €55 in 2019. However, the trajectory was interrupted by the crise des gilets jaunes (yellow vests crisis), which began in November 2018 following a planned increase to the fuel tax component of the CCE. The government froze further increases, and the carbon price has since been maintained at approximately €45-50 per tonne, with the 2030 target revised.

Legal Framework and Compensation Mechanisms

The CCE applies to all fossil fuels used for heating, transport, and industrial purposes, with exemptions for energy-intensive industries subject to carbon leakage risk and for sectors covered by the EU Emissions Trading System (EU ETS). The tax is collected by customs authorities (Direction Générale des Douanes et Droits Indirects) and is a major source of government revenue, generating approximately €8-10 billion annually.

The Loi de Finances establishes compensation mechanisms for households and businesses affected by the carbon tax. These include the chèque énergie (energy voucher) for low-income households, a reduction in the Impôt sur le Revenu for households that reduce energy consumption, and lower corporation tax rates for energy-intensive manufacturers. The Loi de Finances pour 2020 also introduced the prime à la conversion (conversion bonus) and bonus écologique (ecological bonus) for low-emission vehicles, designed to offset the increased cost of fuel.

The compensation mechanisms were significantly expanded following the yellow vests crisis. The Conseil d’État in Decision No. 425302 (2020) reviewed the legality of the compensation system and upheld it, finding that the government had taken adequate measures to mitigate the social impact of the carbon tax.

Relationship with the EU ETS

The French carbon tax covers emissions not already subject to the EU ETS (Directive 2003/87/EC). The EU ETS applies to electricity generation, energy-intensive industrial installations, and intra-European aviation. The CCE covers emissions from transport (road and rail), buildings (residential and commercial heating), and agriculture. The combination of the two instruments means that approximately 70% of French CO₂ emissions are subject to a carbon price, one of the highest coverage rates in the EU.

The alignment of the CCE with the EU ETS price trajectory has been a persistent policy challenge. When the EU ETS price rose above €80 per tonne in 2022-2023, the government faced pressure to maintain the CCE trajectory consistent with the EU ETS price signal. The Loi Climat et Résilience (Law No. 2021-1104 of 22 August 2021) introduced a legal requirement for the government to report annually on carbon pricing alignment and to propose adjustments where necessary.

Climate Litigation: The Affaire du Siècle

The Affaire du Siècle (Case of the Century) is the most significant climate litigation in French history. In 2019, four NGOs (Notre Affaire à Tous, Greenpeace France, Oxfam France, and Fondation pour la Nature et l’Homme) filed an administrative action against the French State for failing to meet its greenhouse gas emission reduction commitments. The claimants argued that the State’s failure constituted a carence fautive (culpable omission) giving rise to liability under the Code de justice administrative.

In Decision No. 1904967 (3 February 2021), the Tribunal administratif de Paris held that the State had committed a fault by failing to achieve its carbon budget targets for 2015-2018 and by failing to take adequate measures to close the emissions gap. The court ordered the State to take all necessary measures to achieve carbon neutrality by 2050 and to repair the ecological damage caused by its inaction. In Decision No. 1904967 (14 October 2021), the court ordered the State to pay symbolic damages of €1 to each applicant and to adopt a specific implementation decree by 31 December 2022.

The Grande-Synthe Cases

The Grande-Synthe cases represent the second strand of French climate litigation. The commune of Grande-Synthe, a coastal municipality vulnerable to sea-level rise, challenged the State’s refusal to take additional climate action. In Decision No. 427301 (19 November 2020), the Conseil d’État became the first supreme administrative court in the world to order a government to take concrete measures to meet its climate commitments.

The Conseil d’État held that the State’s failure to achieve its emission reduction trajectory engaged its responsibility and ordered the government to take additional measures by 31 March 2022. In its follow-up decision (Decision No. 427301, 10 May 2022), the Conseil d’État found that the government’s additional measures remained insufficient and ordered further action. The Grande-Synthe decisions have established the principle that climate inaction can constitute a reviewable administrative fault and have influenced climate litigation in other jurisdictions.

The ETS and French Carbon Market Reform

France has supported the reform of the EU ETS, including the introduction of the Carbon Border Adjustment Mechanism (CBAM) under Regulation 2023/956. The CBAM will apply to imports of cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen, requiring importers to purchase certificates corresponding to the carbon price that would have been paid under the EU ETS. France has been a leading advocate for the CBAM, viewing it as essential to prevent carbon leakage and to protect the competitiveness of French industry during the energy transition.