Carbon pricing and ways to finance the energy transition : What France does in 3 points
1. –The European carbon market and the Climate and Energy Contribution
France is very active on the EU Carbon Emissions Trading Market.
But this market only accounts for half of the carbon emissions. It does not account for the emissions of the building and transport sectors. However, carbon pricing is essential to accelerate the development of clean vehicles and stimulate thermal renovation of housing (which brings household bills down and creates jobs in the construction sector).
This is why the Energy Transition Act sets a carbon price of 56 EUR per tonne in 2020 and 100 EUR per tonne in 2030.
This increase in the proportion of carbon in energy taxation is broadly offset by charges reductions for products, work and revenues that contribute to the energy transition. For example, the energy renovation of buildings benefits from a tax credit, reduced VAT, and the interest-free eco-loan.
It also contributes to financing the development of renewable energy.
2. –The Energy Transition Act contains several key measures for the consideration of climate change by businesses and investors :
- For businesses : the Act requires each company to publish the following data in its annual management report, approved by the Board of Directors and the general meeting of shareholders :
- An analysis of the financial risks related to climate change to which the company is exposed ;
- Its “low-carbon” strategy to reduce its greenhouse gas emissions, not only direct but also indirect emissions (goods and services it produces).
- For institutional investors :
The Act requires :
- To measure and publish the carbon footprint of financial assets ;
- To give proof of was is implemented to increase green investments
3. – The creation of a label for green financing, called “Energy and Ecological Transition for Climate Label”
This label is based on two innovative principles :
The concept of green share in a company’s activities
Measuring the environmental impact of these activities.
The “Energy and Ecological Transition for Climate Label” requires :
Investing a significant part of labelled funding in companies and projects working towards the energy and ecological transition,
Measuring the actual environmental footprint of the portfolio, through impact indicators in the areas of climate change, water, natural resources and biodiversity,
Managing actively all major potential risks of environmental, social or governance controversy.
It is an essential tool for :
Identifying investment funds that finance the green economy,
Encouraging the creation of new green funds,
Facilitating companies’ reporting on the green part of their activities.
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