France's Environmental Policies: Internalising Global and Local Externalities

Abstract

France has a very ambitious environmental-policy agenda, aimed chiefly at cutting greenhouse gas (GHG) emissions but also at dealing with local air and water pollution, waste management and the conservation of biodiversity. The laws that followed the Grenelle de l’environnement encompass policy measures in energy generation, manufacturing, transport, waste management, construction and agriculture to encourage a transition towards a low-carbon economy. The government is committed to an ambitious GHG reduction objective of 75% to be achieved by 2050. This paper evaluates its policies in terms of cost effectiveness, with a special emphasis on: how to impose a unique carbon price in the aftermath of the rejection of the carbon tax by the Constitutional Council; the challenges relating to renewable and nuclear electricity generation; the ways to reduce carbon intensity in the residential and transport sectors; how to improve waste management; and whether external costs related to the use of fertilizers and pesticides are properly accounted for in water management. Whereas considerable progress has been made to 'green' the economy, an important challenge that remains is to internalize global and local externalities in all sectors of the economy so as to increase the cost-effectiveness of environmental policies.

Keywords: GHG emissions, global warming, carbon price, abatement cost, renewables, nuclear power, negative externalities, environmental policies, water pollution, waste management

JEL Classification: Q410, Q420, Q480, Q520, Q530, Q540, Q580, H230