France to Fund Nuclear Reduction with Carbon Tax

Following the election of President Francois Hollande in 2012, France has engaged the public in a series of regional and web-based debates to pin down key tenets of its so-called “energy transition.” The country—which lacks indigenous energy resources and derives more than 75% of its electricity from 58 nuclear reactors—is considering capping nuclear’s share in its new energy mix at 50% and vastly increasing the share of renewables.

But, though the transition plan is publicly popular, a French parliamentary commission has warned that the country risks being exposed to a power price shock if it too speedily reduces its reliance on nuclear. This September, during a two-day conference that concluded public debate, Prime Minister Jean-Marc Ayrault acknowledged the energy transition could prove costly. However, France is currently spending $5.4 billion per year to fund renewables and $1.3 billion on energy efficiency measures, he said. The remainder, he announced, would be funded by a new carbon tax on fuel consumption that was expected to amount to $1.3 billion per year by 2016 in addition to an unspecified contribution from profits gained by the country’s nuclear plants.

The new tax to be levied on all fossil fuels in proportion to the emissions they generate, called the “climate contribution,” is expected to be adopted under the 2014 energy and finance act. At the same time, France’s Economic, Social and Environmental Council (ESEC) has proposed to lower the value added tax (VAT) to lighten the country’s tax burden, which some observers say is already stretched to the limit.

“Everything will be done to lower production costs” for wind and solar, President Hollande told attendees at the September conference. Though he did not elaborate on how the country will embark on reducing nuclear’s share, beyond the planned shuttering of the Fessenheim plant, he said renewables should be incentivized so that “every euro paid by consumers is the most efficient possible and will favor the creation of national industrial champions.” Hollande also noted that feed-in-tariffs “can lead to a waste of public funds, profit-taking and speculative behavior.”

Meanwhile, documents published by ESEC charting the energy transition between 2020 and 2050 call for “an electricity service with lower production costs in the mix,” one that will take into account “all energy sources.” After 2020, ESEC calls for the attachment of a “meaningful price to carbon” and “clarity and transparency” of the carbon tax. The country should also invest and expand research and development in other clean technologies, including the exploration of all options for the “recovery and conversion of carbon dioxide, including capture and storage.”

1. Vessel of change. France has embarked on a transition to reduce the share of nuclear power in its electricity mix from the current 75% to 50% by 2050. It is unclear if the country will proceed with plans for new reactors. One much-watched project is the construction of an AREVA 1,650-MW EPR unit at an existing two-unit plant at Flamanville, Normandy (shown here), which recently received its reactor vessel. Courtesy: AREVA