French elections: Candidates’ proposals to lower energy bills hit European law

5 months ago 14

All three blocs running in French parliamentary elections are promising rebates on energy bills, with most of the envisaged measures compatible with European law but subject to certain conditions.

On 1 July, gas bills for French households are set to rise by 11%. This bad news comes in the middle of the two-stage parliamentary elections, which will take place on 30 June and 7 July, following the dissolution of the National Assembly by President Emmanuel Macron.

Both the Front populaire, uniting the left and far-left, and the far-right Rassemblement national (RN) propose measures to combat rising prices, at a time when purchasing power has once again become the main concern of the French.

However, some of the measures proposed by the candidates run against European and French law.

The RN wants to lower VAT

The RN is promising to cut value-added tax (VAT) on fuel, energy, electricity, gas and heating oil, from 20% to 5.5%, if it wins a majority in the National Assembly.

According to the European VAT directive, lowering VAT on electricity and some low-emission heating is possible, down to a minimum of 5%.

To enact this reduction in France, “it will have to be passed by a finance bill, to amend the general tax code”, Matthieu Toret, a lawyer specialising in energy taxation at Enerlex, told Euractiv.

On the other hand, lowering fuel tax below 15% is prohibited by the same EU directive, which was expressly modified in 2022 to remove the possibility of a VAT rate reduction or exemption for fuels and other products with harmful effects on the environment.

To proceed legally and avoid the risk of EU fines, France would need to negotiate with the European Commission – something RN President Jordan Bardella has undertaken to do.

France could either request a temporary and detailed derogation from EU law, as Poland successfully did in February 2022, or attempt to amend the directive, which would take several years.

The Front populaire wants to freeze prices

To reduce bills, the Front populaire plans instead to freeze energy and fuel prices. In other words, the return of the price shield introduced by the government at the height of the energy crisis between late 2021 and early 2023.

Under French law, a price freeze can only be for a renewable period of six months, and must be justified by “exceptional”, “crisis” or “manifestly abnormal market” situations.

“The current widespread inflation does not meet these criteria,” Jean-Paul Markus, a professor of public law at the University of Paris-Saclay, wrote in January.

Hadrien Clouet, outgoing MP for the far-left ‘La France insoumise’ (Popular Front) responsible for energy issues, disagreed.

“I can’t imagine the Conseil d’Etat [supreme court in French public law] deeming that the country is not in crisis when people are having difficulty heating themselves,” he told Euractiv.

In the end, Markus believes it would not be entirely impossible to resort to price freezes. However, it would have to comply with European competition law.

The other measure advocated by the Front populaire – and by the RN – would “abolish the 10% Macron tax on energy bills”, i.e. the increase in excise duty on electricity (CSPE), agreed by the French government in January, said Clouet.

At the height of the crisis, the CSPE was brought down to its lowest level allowed under European law (€1 per megawatt-hour, MWh). January’s decision saw the rate increase to €21/MWh – close to its normal level – which caused electricity bills to rise by around 10%. The CSPE could be lowered again without contravening European law.

Generally speaking, the measures advocated by the RN and the Popular Front “seem legally feasible, but not immediate”, explained Matthieu Toret. Yet both blocs seem to want to act with urgency.

The majority relies on the mechanics of the market

For its part, the President’s camp is relying on the mechanics of the European electricity market. Prime Minister Gabriel Attal is betting that electricity bills will fall by 10% to 15% “from next winter”, despite a return to normal levels of taxes such as the CSPE, due to the easing of prices across the European electricity market.

This price cut requires no legal or administrative intervention, since it is the result of market trends. “Electricity prices have fallen and so, automatically, the tariffs paid by consumers will also fall”, Nicolas Goldberg, head of the energy unit at think tank Terra Nova, told TF1 on Monday (16 June).

[Edited by Laurent Geslin/Donagh Cagney]