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France unveils first-of-its-kind 'green budget' benchmarks to meet climate goals

French Minister of Public Action and Accounts Gerald Darmanin presents a report by the Inspection Generale des finances on environmental budgeting on September 25, 2019 at the Economy ministry in Paris.

France unveiled new environmental criteria for evaluating its national budget this week. Climate groups have welcomed the initiative but say the government’s immediate budget plans are deeply out of step.

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“Make our planet great again.” That was French President Emmanuel Macron’s call in 2017, affirming France’s environmental ambitions in response to the US withdrawal from the Paris Agreement. At the One Planet Summit six months later,Macron outlined a series of climate commitments, including a “Green Budgeting” initiative designed to steer world economies toward carbon neutrality by 2050.

Now that initiative is bearing fruit, as France presented its first environmental evaluation of the national budget on Wednesday. The report is part of an international effort, led by the OECD and Mexico as well as France, to establish criteria for assessing the environmental impact of public spending. In France, the criteria are set to go into effect over the coming year as the government prepares its budget for 2021.

“In 2021, we will have an accounting benchmark … that allows us to determine whether or not [the budget] is compatible with the environment,” Minister of Public Accounts Gérald Darmanin told reporters on Wednesday.

The benchmark system rates expenditures in France’s budget on their impact in six different areas: climate protection and adaptation, biodiversity, pollution, resource use, and waste. The ratings go from -1 if an expenditure causes “direct harm to the environment” up to 3 if it “directly participates in the production of an environmental good or service”, said Darmanin.

In their evaluation of the current (2019) budget, auditors from France’s nationalInspection générale des finances (IGF) identified about €35 billion in spending with a broadly positive environmental impact as opposed to €25 billion with a broadly negative impact. (The auditors homed in on the spending areas with the most direct environmental impact, setting aside the large share of France’s nearly €400 billion budget as neutral.)

Infographic by France 24

Subsidies for fossil fuels make up the most harmful spending area, said Darmanin. Airlines and shipping companies, for example, are largely exempt from France’s notoriously high fuel taxes, a proposed increase in which sparked the country’s Yellow Vest revolt last fall. Energy-intensive manufacturing and construction also benefit from tax advantages, as does agroindustry.

On the positive side, auditors highlighted spending on renewable energy, rail and public transport, building renovations, sustainable agriculture, and environmental protection including for forests, waterways, and biodiversity. Nuclear energy, which produces almost three-quarters of France’s electricity, falls somewhere in between: it scores a positive on climate protection but a negative in terms of waste.

Immediate budget plans fall short

The Climate Action Network (Réseau Action Climat), a coalition of groups including Oxfam France, Greenpeace, Secours catholique (Catholic relief) and 350.org, called the new environmental benchmarks “an essential step” toward a green transition. But it said the effort “must not stop at the level of evaluation: to be consistent with its commitments, France will need to quickly eliminate financing that is harmful to the climate”.

Aurore Lalucq, an economist and member of the European Parliament with the left-wing party Place Publique, shares this assessment. The budgeting initiative marks a real advance in policymaking, she said, because it establishes an economic measure independent of GDP. This, in effect, “institutionalises demands that social and environmental groups have been making for quite a few years”.

Lalucq doubts, however, that Macron’s government will put the benchmarks to meaningful use. “They're always very strong on words and very weak when it comes to action,” she said. “If the government really takes (this report) seriously… it calls into question its entire policy agenda.”

The report’s presentation came just ahead of Finance Minister Bruno Le Maire’s unveiling Thursday of the government’s proposed budget for 2020. That budget was drafted independently of the new green criteria, which don’t come into effect until the next budget cycle (2021).Lalucq said the current budget shows how far the government still has to go to meet its environmental commitments.

So far, she says, “we’re not at all up to the task … we’re even retreating on certain points”.

Le Maire presented the 2020 budget as a response to the “social crisis” highlighted by Yellow Vest protesters. The government envisions a variety of tax cuts, which it says will boost investment and consumer spending power. It will also impose an “eco-tax” on flights out of France, estimated to bring in €230 million over the next year, and begin to scale back fuel-tax exemptions for the construction industry, also worth about €200 million.

Business Daily: France unveils its 2020 budget

Critics say, though, that the budget is largely in keeping with Macron’s policies to date, and falls short of the sharp “environmental turn” he has promised in recent months. The environment ministry faces continued staff cuts despite a boost in spending, while the military, police and prisons will see more than 3,000 jobs created. This comes as IGF auditors singled out France's military as the branch of government responsible for the majority – three-quarters – of direct fossil-fuel consumption.

Also in the proposed 2020 budget are tax cuts for large businesses, with rates dropping from 33 percent today to 25 percent by 2022. The far-left party La France Insoumise called Le Maire’s plan “another budget for the rich”, saying it reflects “environmental irresponsibility and heightened social discrimination”.

“At the moment, the ‘green budget’ looks a bit like greenwashing,” says Lalucq. She said the government is stuck in a discredited, trickle-down economic model, driven by handouts to large firms on the one hand, and social spending cuts on the other. “Just as an ‘all-growth’ model is bad for the environment, so is austerity … anything that will make people’s lives more precarious is bad for the environment.”

Instead, she proposes a program of large-scale, targeted investment along the lines of a “Green New Deal”. She says such an approach is needed as much in Europe as in the United States, where the concept has been popularised by a new crop of progressive legislators including Alexandria Ocasio-Cortez. Lalucq points to growing support for such a programme from international institutions like the OECD as well as top French economists like Thomas Piketty, Olivier Blanchard (former chief economist at the International Monetary Fund) and Jean Pisani-Ferry (a former economic adviser to Macron).

A template for international use

Despite the gap between the green benchmarks announced Wednesday and the French government’s immediate budget plans, climate campaigners are hopeful that the new audit can provide a template for France and other countries alike to begin rethinking their economic priorities.

“We’re still at the beginning” of this work, said French budget director Amélie Verdier on Wednesday. The new criteria only serve as guidelines; the test will be to see how lawmakers take them into their own hands.

Taken fully into account, says Lalucq, the benchmarks could help displace an “outdated” economic model that has held back international action on climate change. That, she adds, would be “pretty exciting”.

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