Climate legislation on both sides of the Rhine: steps in the right direction, but still very tentative

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By Nicolas Meunier – Consultant

As 2020 begins, two new laws with implications for climate action are taking effect in both France and Germany. In France, this refers to the 2020 Finance Act [1]. Among the many measures that were passed, we detail the following below a few in the field of mobility.

In the maritime sector, let's start by mentioning the one aimed at support the purchase of boats powered by alternative energy sources. This is a tax incentive—a accelerated depreciation scheme—designed to promote energy sources such as hydrogen, liquefied natural gas, and electricity. In the aviation sector, The eco-tax proposed at the 2nd Ecological Defense Council meeting was adopted without changes as part of the existing solidarity tax on airline tickets, known as the “Chirac tax.” This eco-tax therefore applies to all flights departing from France—except those bound for the overseas territories and Corsica—with amounts ranging from €1.50 to €18, and will be used to fund the AFITF (French Transport Infrastructure Financing Agency). While this tax is a step in the right direction, it is worth noting that the amounts are the lowest among the nine European countries planning to adopt an eco-tax, and notably much lower than in Germany (between €10 and €59 starting in April 2020). [2]. Climate-related aviation taxes in Europe:

Source: Green Air – ATAG (Air Transport Action Group)

Finally, for the road sector, there are two key measures, the first being the reduction in the tax break on diesel fuel for trucking companies. The 2020 Finance Act reduces the TICPE tax credit for diesel used by transporters operating vehicles weighing more than 7.5 metric tons by two euro cents per liter. Here too, the additional revenue will be allocated to the AFITF so that the sector can contribute to the financing of national highways. The second measure concerns the Tighter rules for the auto insurance bonus-malus system. A penalty ranging from €50 to €20,000 will apply to cars with emissions exceeding 110 gCO2/km (138 gCO2/km under the WLTP standard—which is considered a more accurate reflection of real-world driving emissions and will be used starting in March 2020—and a bonus of up to €6,000 for electric vehicles emitting less than 20 gCO2/km. Across the Rhine, Germany has adopted its climate plan [3] after months of negotiations. Specifically, it involves reduce Germany's greenhouse gas emissions by 55% by 2030 compared to 1990 levels. In the transportation sector, the plan relies in particular on its rail networks. In fact, with emissions ranging from 13 to 65 gCO2 per passenger-kilometer, even with its electricity mix—which is higher in carbon emissions than France’s— German rail far outperforms cars and airplanes in terms of climate performance [4]. The government promises toaccelerate its investments in the renovation of the rail network by 2030, and lowers the VAT on trains from 19% to 7%% [5]. In France, rail transport already benefits from a reduced VAT rate of 10%, as do all other modes of domestic transport (air, road), although this VAT rate has nearly doubled since 2011 (5.5%) [6].

Perhaps France could follow Germany's example? In terms of mobility, Germany therefore seems to be moving more toward incentives for low-carbon transportation, while France has primarily implemented disincentives for high-carbon transportation: Two different approaches to the same goal of climate transition. Although positive from a climate perspective and calling for supporting measures to facilitate the transition of the sectors concerned, the announcements regarding these two climate plans remain very timid and certainly fall short of Angela Merkel’s New Year’s resolution, in which she expressed her desire to “do everything humanly possible to overcome this human challenge” [7]. Will the implementation of the European Green New Deal, beyond the announcements already made, lead to greater ambition?

Sources: [1] Environment News [2] Green Air [3] Understanding Energy [4] Pro-Rail Alliance [5] France TV Info [6] Mobilités Magazine [7] Ouest France