BriefCASE: Climate politics – France’s carbon footprint incentive stirs debate on global EV supply chains
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The French government launched a program earlier this year to
promote electric car adoption among low-income households, but the
overwhelming response exceeded supply. The program offered leasing
options and subsidies, contributing to increased electric vehicle
sales. The program includes a carbon footprint incentive penalizing
batteries produced in countries with carbon-intensive grids.
The original initiative offered leasing options for 25,000
European-manufactured EVs at a monthly rate of €100-€150, without a
deposit. However, the response was overwhelming, with 90,000
applications received within weeks, surpassing the available
supply.
The program aimed to make EVs more accessible by providing
subsidies of up to €13,000 per qualifying EV and affordable leasing
options. Eligibility criteria included a maximum taxable household
income of €15,400 per person and a retail price limit of
€47,000.
Initially, the government allocated €1.5 billion for 20,000
leases, but owing to the high demand, it increased the number to
50,000. However, officials halted the scheme in 2024 with
expectations that it will resume in 2025.
The program is an extension of France’s “bonus ecologique” and
has contributed to a huge increase in EV sales in the country. The
government has since announced a 20% reduction in subsidies for
higher-income car buyers of electric and hybrid vehicles, aiming to
prevent budget overruns. This decision has raised concerns about
potential declines in registrations, similar to what happened in
Germany.
Although the ecological bonus has been instrumental in boosting
EV sales, the recent subsidy cut has sparked opposition from some
calling for the need for elected officials to prioritize the
ecological transition.
Ali Adim, senior research analyst for batteries at S&P
Global Mobility, said: “One of the innovative features of the
ecological bonus is its consideration of the carbon footprint of
vehicle components, such as batteries. This incentive not only
targets the curtailment of tailpipe emissions by promoting EVs, but
it also aims to lower emissions during the production phase. EVs
are associated with significantly higher production emissions than
internal combustion engine (ICE) cars due to their heavy and
carbon-intensive battery packs. The new incentive mechanism in
France directly addresses this gap and could serve as a role model
for future legislation in other countries and regions. Applying a
carbon footprint threshold to EV components (batteries) could have
several implications. Batteries produced in countries with more
carbon-intensive grids will be penalized. As a result, all Chinese
vehicle models were disqualified for the eco-bonus last year.”
S&P Global Mobility’s Battery Carbon Footprint forecast
shows that the average carbon footprint of batteries produced in
China in 2023 was 72 kgCO2-eq/kWh, higher than Europe’s 51
kgCO2-eq/kWh.
Diana Quezada, senior research analyst for EV charging at
S&P Global Mobility, agrees that the government’s incentives
have been key in encouraging the installation of EV chargers, given
their initial low return on investment to the charge point
operators. “However, this will change with the increasing mass
adoption of EVs in France, which is driven by the growth in the EV
charging network across the country. To this end, the French
government’s Advenir program remains strategically important as it
targets companies and communities keen on investing in EV charging
infrastructure, especially the publicly available EV chargers
installed on the roads.”
Author:
Amit Panday – Senior Research Analyst, Supply Chain &
Technology, S&P Global Mobility
To read our detailed insight on the
France EV policy for 2024, click here.
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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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