Significant Increase in Public Spending Needed
To achieve its climate goals by 2030, France will need to more than triple its annual public spending on climate-related initiatives, reaching up to €103 billion per year.
This is unless reforms are implemented to shift some of the financial burden towards businesses and households, according to a recent study by the Institute for Climate Economics (I4CE).
Current Climate Spending and Investment Gap
Currently, the French government and local authorities allocate approximately €32 billion annually to climate-related expenditures.
However, the I4CE report estimates that an additional €71 billion in public spending will be required by 2030 to bridge the climate investment gap.
Scope of Investments for Climate Goals
This figure encompasses the investments necessary for France to meet its European commitments to reduce greenhouse gas emissions by 55% by 2030 compared to 1990 levels and to achieve carbon neutrality by 2050.
This includes electrifying the vehicle fleet, renovating buildings, developing public transportation, and expanding renewable and nuclear energy sources.
Potential Reduction in Public Spending with Reforms
The additional financial burden could be reduced to a “minimum need” of €39 billion, more than doubling current spending, if the government implements a series of measures.
These measures include strengthening regulations, focusing aid on low-income beneficiaries, eliminating tax incentives for fossil fuels, and utilizing energy-saving certificates or tariffs for services rendered to users.
Focus on Public Infrastructure
With these reforms, the remaining public spending needs would primarily focus on renovating public buildings and transportation infrastructure, particularly railways.
The I4CE study identifies sector-specific options for distributing public and private funding. For instance, subsidies for electric vehicles could be replaced by “greening quotas” for long-term rental companies, who are major buyers of new vehicles that later enter the used car market.
Innovative Financing Mechanisms
Another suggestion is to introduce a mandatory renovation obligation for buildings, with funds set aside at the time of purchase for non-renovated properties and released upon completion of renovations. This approach encourages energy-efficient upgrades and provides a source of financing through mortgage loans.
The study aims to contribute to the ongoing debate on financing the ecological transition, acknowledging the uncertain political landscape and the need for broad consensus on climate action.
Multiple Paths to Achieving Climate Goals
The I4CE emphasizes that various pathways exist to share the financial burden and ensure the accessibility of the transition for both households and businesses. However, it cautions against relying on unrealistic expectations of “magic money,” whether public or private.
The primary areas for public investment are expected to be building renovations, railway infrastructure, and the greening of the vehicle fleet. These sectors require significant funding to achieve France’s climate objectives.
Comparison with Previous Estimates
Last year, a report by Jean Pisani-Ferry and Selma Mahfouz estimated the cost of the transition at €25-34 billion in additional public investment by 2030 compared to the 2023 budget. While the government initially announced a €7 billion increase in the 2024 budget, this amount was later reduced.
The I4CE estimates that total investments for the transition, including both public and private funding, need to reach €206 billion annually by 2030. This highlights the substantial financial commitment required to achieve France’s ambitious climate goals.