France must cut reliance on oil and gas, says Hollande

PARIS Fri Sep 20, 2013 11:51am EDT

1 of 2. French President Francois Hollande delivers the inaugural speech of the 2nd annual environmental conference in Paris September 20, 2013.

Credit: Reuters/Charles Platiau

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PARIS (Reuters) - France should aim for a 30 percent cut in fossil fuel use by 2030, President Francois Hollande said in a speech on Friday which included plans for a carbon tax from 2014 and a tax break on home insulation to help consumers save energy.

Hollande faces a delicate balancing act as he reconciles demands for more binding environmental targets from his Green Party coalition partners with French households and businesses increasingly wary of tax rises.

Elected last year pledging sweeping energy reforms, Hollande said the cut in fossil fuel use from current levels was needed to meet the country's goal of halving overall energy use by 2050.

"Europe must set an example," he told an energy conference in Paris. "It's an objective that can stir us, but will have to be adjusted to our growth performance and will suppose major technological innovations."

Prime Minister Jean-Marc Ayrault is expected to provide details on the proposals on Saturday when the two-day conference ends, while fiscal details are likely to be inserted in France's budget bill to be presented next week.

Hollande said France would introduce a carbon tax in 2014, but stopped short of confirming French media reports that the new levy could raise 500 million euros next year and up to 4 billion euros in 2016.

Britain announced a carbon tax in April.

"If this tax is created by decreasing other levies, why not?, but if this is a way to raise taxes overall, then no," said Pierre Gattaz, head of French business lobby Medef.

Hollande added that proceeds from the new "energy-climate contribution" would be redistributed through lower taxes elsewhere.

He proposed a cut in value-added tax (VAT) on home insulation work to 5 percent from 7 percent currently to increase energy efficiency.

The government's main energy ideas include efficiency programs, a push for more electric vehicles and a boost in renewable energy use.

On Friday Hollande asked his industry minister to speed up construction of charging infrastructure for electric vehicles, on which French firms such as carmaker Renault and Bollore have invested billions.

Hollande also stuck to his campaign promise of cutting France's reliance on nuclear power to 50 percent from 75 percent by 2025, adding that he wanted to boost alternative energy sources.

COST SAVINGS

France draws 80 percent of its electricity output from its fleet of 58 nuclear reactors but relies on oil and gas imports for other energy needs such as transport.

It cut oil consumption by almost 10 percent between 1990 and 2012, helped by more fuel-efficient vehicles and more use of its own electricity over imported gas.

But with oil prices rising about fivefold in the meantime, energy imports have weighed more on the country's trade balance, with its total energy bill reaching a record 68.7 billion euros in 2012.

Hollande said that his plans aim to save 20 billion to 50 billion euros on France's annual energy bill by 2030.

EUROPEAN CARBON TARGET

He also called on European Union partners to agree a more ambitious target to cut greenhouse gas emissions and said the 28-nation bloc should consider imposing an EU-wide carbon tax.

Hollande reiterated his call for the EU to cut CO2 emissions by 40 percent by 2030 compared to 1990 levels versus the existing 20 percent goal.

That proposal chimes with plans under consideration by the European Commission. EU sources said on Thursday the bloc's executive was also considering doubling the bloc's target to cut greenhouse gas emissions.

France and Britain, which have relatively low CO2 emission levels thanks to their supply of nuclear energy, are at the high end of ambitions for the bloc. Countries more reliant on coal, such as Poland, do not want any new target until after 2015.

The European Union's goals can influence the international debate on climate change and also have a bearing on the European Union's Emissions Trading Scheme (ETS), where carbon prices have fallen to record lows this year because of a surplus of tradable permits to pollute above allocated levels.

(Additional reporting by Muriel Boselli, Ingrid Melander, Marion Douet, Julien Ponthus; editing by Mark John and Jason Neely)

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