Friday 07/12/2018

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Macron's environmental ambitions

Responsible Investment Strategist

In electing their new president and refusing that the far-right rule their country, the French in fact voted for the implementation of the Paris Agreement and for reducing dependence on nuclear energy. However, actual details are absent from the president’s programme.

Although it was probably not a priority when opting for Macron, the French also voted to pursue the fight against climate change, to which France has been very committed since the December 2015 Paris Agreement. As a matter of fact, Emmanuel Macron has clearly made the implementation of the Paris Agreement a priority in terms of the environment. In order to do so he has endorsed the French law on energy transition and the green economy and a low-carbon economy by, among other things, upholding the moratorium on the exploitation of shale gas and maintaining the focus on renewable energy.

And what about nuclear energy?

Although Emmanuel Macron has confirmed the objective to cut back nuclear energy from 75% of electricity generation to 50% by 2025, he has provided little detail on the way this controversial energy source could be replaced. After all, it remains the main driver behind the decrease in fossil energy consumption in France. Indeed, France is still highly dependent on nuclear energy, and its plants are ageing. Considering that an on-shore wind turbine generates between 2 and 4 MW, some 15 to 20,000 new wind turbines would have to be built by 2025 to offset reductions in nuclear energy. If Emmanuel Macron were to double solar and wind energy, he would cut back nuclear energy by just one third.

France: energy mix - generation

Pollution, migration and the energy transition

Nevertheless, the new president is very ambitious, also in environmental and ecological matters. Specifically, he wants to improve air quality for the French people while most major cities in the country currently have air pollution levels well above WHO standards. By closing down the last coal-fired plants and taxing diesel engines the president wants to reduce premature deaths attributable to poor air quality. Moreover, he also wishes to address the issue of migration due to climate change and the catastrophes it brings. However, the president’s political project is also based on cutting back spending, which is rarely compatible with massive investments, even in favour of the environment. Fifteen billion euros have been earmarked for the energy transition, but given the sheer size of this task it is a minimum and the real impact remains to be seen.

Carbon pricing

Finally, another important point in Emmanuel Macron’s programme is to obtain a carbon price of EUR 100/tonne carbon by 2030. This is a strong statement on the part of the president as carbon pricing was neither a topic nor an objective of the Paris Agreement. It is clear that appropriate carbon pricing would genuinely facilitate the shift towards a low-carbon economy. However, will the president manage to implement his projects when a price of EUR 56/tonne carbon (2020 objective) is already having a strong impact on French households and companies through rising electricity costs? Estimates - in particular based on research by HSBC - indicate that the electricity price for the country’s industry will rise by 60% and by 20% for households. Let’s not forget either that France is a major exporter of energy (nearly 10% of its annual production). Failing to offset energy generation with other additional capacity following an exit from nuclear energy would jeopardise a part of export revenues.

Major challenges

France currently exceeds its 2020 climate objectives. The main challenge is 2030, when the country needs to demonstrate that its greenhouse gas emissions have been cut by 37% compared to 2005 levels. The law on energy transition aims to address this objective.

Law on energy transition and green growth

  • 40% decrease in greenhouse gas emissions (1990 levels) by 2030
  • Fossil energy consumption of 30% by 2030
  • Decrease in nuclear energy to 50% of electricity generation by 2025
  • Increase in renewable energy to 32% of final energy consumption and to 40% of energy generation
  • Cut energy consumption by half by 2050 (2012 comparison base)
  • Decrease in landfill waste of 50% by 2050
  • Carbon price of EUR 56 per tonne by 2020 and EUR 100 by 2023

However, the president will first have to get the backing of parliament after the upcoming legislative elections to implement his reforms. And in terms of reforms, he has enough on his plate. Will Emmanuel Macron live up to his projects and ambitions? One thing is certain: he will need to deliver on all his commitments.

Emmanuel Macron’s complete environmental programme can be found at (in French):
https://en-marche.fr/emmanuel-macron/le-programme/environnement-et-transition-ecologique

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