2021 Finance Act: What Are the Key Takeaways for Mobility?

This article was originally published in our newsletter "Mobility" Analysis, January 14, 2021. To receive future articles by email as soon as they are published, Subscribe now.

As the year drew to a close, the 2021 Finance Act was enacted—an important annual law because it determines the nature, amount, and allocation of the government’s resources and expenditures for an entire fiscal year. This is a good reason to analyze it in light of the measures concerning mobility, through the lens of climate action!

First, a number of proposals from the Citizens’ Climate Convention were adopted [1]:

• The cap on the Sustainable Mobility Flat Rate [2] The tax deduction, intended to promote low-carbon modes of transportation for commuting, was increased from 400€ to 500€ (proposal SD-A1.1).
• TICPE (Domestic Consumption Tax on Energy Products), which includes the well-known Climate and Energy Contribution (commonly referred to as the “carbon tax”), will increase for kerosene used in general aviation, in order to achieve prices comparable (€67.29 per hectoliter) to those of unleaded gasoline by 2022 (citizen proposal SD-E4).
• The overdamping mechanism for the purchase or lease (with an option to buy) of vehicles weighing more than 2.6 metric tons The program for vehicles that use cleaner energy has been extended through December 31, 2024, to support investment in this type of vehicle [3] (proposal SD-B1.4).
• Electric vehicles are exempt from the special tax on insurance contracts for 2 years (proposal SD-C1.4).
• Finally, The vehicle weight-based penalty has been adopted to be implemented starting in 2022, and the CO2 target has been strengthened (proposal SD-C1.2).

While we welcome the effort to adopt 5 of the 43 measures proposed by the Se Déplacer group of the Citizens' Climate Convention [4], it is simply a matter of a partial adoption of the proposals, except for the one concerning recreational aviation. Regarding the vehicle penalty based on weight and CO2 emissions, we have already discussed in detail the benefits of this measure and the scope of the adopted proposal in a Interview with Nicolas Meilhan. The key point here is that, once again, The introduction of a weight-based penalty is a step in the right direction for promoting energy efficiency, but it is still a small one, because with a threshold set at 1,800 kg and numerous exceptions, this penalty is expected to affect only 2 to 3% of new car sales (or about 60,000 vehicles). Furthermore, the weight-based penalty is not scheduled to take effect until 2022 and “has been an excuse to ease the CO2 penalty "compared to what was originally planned for this year." The carbon penalty thus applies to vehicles emitting more than 133 gCO2/km as of January 1, 2021 (compared to the 131 gCO2/km originally planned). Finally, it is worth noting that there are numerous provisions that fall within the framework of the EU's goal of reaching 14% renewable energy in transportation by 2030 featuring:

• A more stringent selection of biofuel types, by eliminating tax breaks for biofuels derived from PFAD (palm fatty acid distillate, palm residues) and soybeans, all of which are biomass resources whose large-scale production contributes significantly to deforestation (this has already been the case for the past year for biofuels produced from palm oil). Beyond the tax incentives, the maximum blending rate for soy-based biofuel in biodiesel is now 0.7%.
• A (slight) increase in ambition on target biofuel blending rates: +0.1% for diesel and +0.6% for gasoline (in favor of advanced feedstocks), and the establishment of a 1% biofuel blending target for jet fuel (aviation).
• New Energy Sources Eligible for the Tax Benefit such as electricity from renewable sources supplied by publicly accessible charging stations, or hydrogen from renewable sources used in the refining of gasoline or diesel fuel.

In summary, These various measures demonstrate a sound understanding of the challenges involved in decarbonizing transportation, by focusing on commutes, by promoting new propulsion systems for heavy-duty vehicles—which involve high capital expenditures—or by clearly distinguishing between different types of biofuels. However, Ambitions remain very modest : This is a policy of small steps that, while certainly moving in the right direction, fall short of the SNBC, whose goal—let’s not forget—is to reduce CO2 emissions from the transportation sector by 95% by 2050.

Article written by Nicolas Meunier (Consultant) nicolas.meunier@carbone4.com

Sources: [1] AEF Info [2] Service-Public.fr [3] Environment News [4] Citizens' Climate Convention