Establish a level playing field for all energy carriers

 
Efficient electrification requires fair competition between energy carriers
Key actions in this regard will be reducing or eliminating subsidies when appropriate, removing inappropriate charges on electricity bills (i.e. taxes or levies) and taking into account environmental externalities, such as a carbon value.  Existing or planned public policy examples which demonstrate this concept:

France: Contribution Climat-Energie (Carbon Tax)

In 2014, the Government of France put into place a tax based on the carbon content of energy consumed. This tax is specifically aimed at the road transportation and heating sectors, as these are not included in the European CO2 Cap-and-Trade Market (EU-ETS). Certain exemptions and rebates, for example to low-income households, are included.

The rate of taxation is expected to grow every year, although the expected increases for 2019-2022 were suspended in October 2018 following the “Yellow Vests Movement”:

  • Starting point of € 7 /t in 2014
  • € 44.6 /t in 2018
  • Past announced taxation rates (suspended in 2018): € 55 /t in 2019, € 65.4 in 2020, € 75.8 in 2012, € 86.2 in 2022
  • Target of 109 € (2017)/t in 2030.

The objective of the tax is to contribute to the “Low Carbon National Strategy”, which is the roadmap adopted by the French Government in 2015 to reduce greenhouse gas emissions (reduction of 75% in 2050 compared to 1990 emissions). Since then, France has committed to a 40% reduction in its greenhouse gas emissions by 2030 relative to 1990 levels. The Energy and Climate bill, adopted in 2019, sets the objective of carbon neutrality by 2050, through a more than six-fold reduction in emissions relative to 1990 levels.

Revenues from the tax totalled € 6.4 billion in 2017 and € 9.1 billion in 2018. A portion of the tax is directed to financing renewable energy projects.

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France: Bonus for new electric light duty vehicles

In 2018, France committed to carbon neutrality by 2050. To reach this target, decarbonization of the transportation sector is key: in 2017, it was responsible for 29% of French greenhouse gas emissions. Transportation electrification is clearly an efficient way for reducing GES emissions in France, due to the fact that its power generation is already low carbon (69 g CO2/kWh in 2017 versus a world average of 485 g CO2/kWh) and affordable (30% less expensive than the European average).

The objective of a bonus for new clean vehicles and a malus for new emitting vehicles is based on two principles:

  1. Incentivize the purchase of clean vehicles and penalize the purchase of emitting cars
  2. Balance expenditures for the bonus with income from the malus, thus having no impact on the government budget.

This scheme, which favours small cars and penalizes expensive and emitting vehicles, also contributes to addressing the social equity issue raised by the implementation of a carbon policy in France.

Introduced in France in 2008, the bonus-malus instrument was revised in January 2020, as follows:

  • Bonus: 27% of the purchase price with a cap of 6000 € for new vehicles emitting less than 20 g CO2/km (in practice, that means full electric vehicles), as well as for 2- or 3- wheel vehicles below 3 kW;
  • A progressive malus for new emitting vehicles, ranging from € 50 for 110 g CO2/km to € 12,500 for 173 g CO2/km and above.

Today’s implementation incorporates major improvements compared to the 2008 scheme. At that time, a bonus was granted for the purchase of new cars emitting less than 100 g CO2/km (€ 1000 for 100 g CO2/km to € 200 for 130 g CO2/km), no bonus-malus between 130 and 160 g; and a progressive malus from € 200 for 161 CO2 g/km to € 2600 for 250 CO2g/km). This measure aimed at replacing aged and emitting cars by new and less emitting ones. However, it resulted in a “rebound effect” with an increase in car purchases, car trips and CO2 emissions. And as bonus expenditures largely exceeded malus revenues, the related budget was also unexpectedly unbalanced.

Recent increases in sales of electric cars and related avoided CO2 emissions from transportation can be attributed in part to the bonus scheme. Annual sales of full electric passenger vehicles rose from 5,663 in 2012 to 17,268 in 2015 and 42,763 in 2019.

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The Netherlands: Energy for Transport legislation

In 2018, the government of the Netherlands adopted the Energy for Transport legislation for companies that deliver fuels to the transport sector

Under this regulation, companies which physically deliver renewable fuels (including clean electricity) to the transport sector create renewable energy units (HBEs), whereby 1 HBE represents 1 gigajoule (GJ) of renewable energy delivered to the Dutch transport market. Providers claim their deliveries in the Energy for Transport Registry (REV) and fuel suppliers that are subject to an obligation to use HBEs use the HBEs in order to comply with their obligation.

It is expected that this legislation will help increase the share of renewable energy (such as electricity or biofuels) in the transport sector and thereby reduce greenhouse gas emissions from transport fuels.

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