The cost of CO2 in French electricity: tax and/or market? Double the punishment

While the debate surrounding the ‘yellow vests’ seemed to focus primarily on the taxation of hydrocarbons – CO2-emitting fossil fuels -, the issue of the price of electricity – which, in France, rightfully crystallises around the evolution of regulated tariffs, as virtually all offers to individuals are indexed there – is beginning to gain momentum. It’s certainly not the prospect of having a ‘small’ law on energy at the start of 2019 that is going to put minds at ease. As is well known to all, electricity in France is largely low-carbon (between 50 and 100kg of CO2 per MWh on average currently), and French electricity consumers will be inclined to believe themselves shielded from any carbon price effects. Faced with the rumour, doubt sets in, and finally, the question is raised: does the cost of CO2 affect electricity prices? The answer is yes. A residential customer in France pays for CO2 emissions at a price equivalent to €92.80/Tn.

However, this time, the cause is neither the French CO2 tax, the Climate-Energy Contribution (CCE) – whose value according to the French Finance Law of 2018 is €44.6/Tn of CO2 in 2018, expected to be €55/Tn of CO2 in 2019 and €86.2/Tn of CO2 in 2022 – nor the CSPE, – which, thanks to the CCE, doesn’t seem to be rising from its rate set in January 2016 (€22.5/MWh) – but the value of CO2 in the European market, the European Union Allowances (EUAs) of the European trading system (ETS).

Here, we must include a disclaimer, as the ETS is a particularly sensitive subject in Europe, any questioning of which would be tantamount to opening a real Pandora’s Box. Even if the exercise of explanation sometimes requires demonstration of critical thinking, the author of this article wishes to express his complete commitment to the European environmental objectives in general and those established in the Paris Agreement in particular.

The value of EUAs has three-folded, even four-folded, in 2018 to reach a current price of approx. €25 (per tonne of CO2 equivalent) and, because of the organisation of the electricity markets, a €1 increase in EUAs rises the price per MWh of electricity by nearly €1… from Norway to France. This is a well-known phenomenon and is even quantified within the Energy Code[1] in France: €1 increase in the EUAs is reflected on average by a €0.76 increase for a MWh of electricity purchased on the French market.

On this basis, the market price of electricity in France (currently around €61/MWh for 2019) would include an estimated additional cost of 25×0.76=€19/MWh on account of the ETS. Thus, returning to the average of electricity production emissions in France (less than 0.1 tonne of carbon dioxide per megawatt hour), the weight of carbon taxes on electricity prices in France is therefore more than 19/0.1=€190/Tn of CO2! (More than 4 times higher than the CCE applied to fossil fuels!).

How can we justify that electricity is the most highly taxed energy for CO2 emissions in France?

France had placed limits on this incongruity by establishing the ARENH mechanism at €42/MWh, thereby largely eliminating the impact of the ETS (the difference between the market price and the ARENH is indeed in the order of the €19/MWh previously mentioned).

The current problem is that, for the first time since its establishment in 2011, on account of the competition’s development, the French Energy Regulatory Commission (CRE) announced on 29/11/2018 that the [ARENH] rights would be reduced for 2019. The part of regulated selling prices of electricity (TRV) that is market-driven will increase on account of this reduction (in the range of 25%). In their press release dated 29/11/2018, the CRE thus announced the next increase of the same regulated selling prices.

Until now, individual consumers were exposed to the market for the energy part of their supply that is not covered by the ARENH. Moreover, mainly owing to the low value of EUA prices in recent years, the difference between the ARENH price and the market prices was small (indeed, in certain years, like in 2016, the market price was even more competitive). However, the same cannot be said for 2019, as the consumer will suffer double the punishment: an increased part subject to the market price (on account of the ARENH reduction) and a higher market price resulting primarily from the increase of EUA prices.

In more specific terms, the average part of the ARENH rights in regulated prices is 68%[2]; thus, prior to ARENH reduction, 32% of the supply depended on markets prices. As the demand exceeded the ARENH ceiling, ARENH allocation will be reduced at 75.23% of the ARENH rights for 2019, and now such exposure increases to 48.84% of the supply. Thus, the ‘CO2 tax’ on account of the ETS is reduced to approximately 19×48.84%, or €9.28/MWh. Returning to a CO2 emission factor for French production of 100kg/MWh, this corresponds to a carbon tax of €92.80/Tn (which is doubled based on an emission factor of 50Kg/MWh!)

We’re sorry for the complexity of these explanations. Unfortunately, solutions to the current environmental taxation crisis (CSPE, CCE, TICGN [domestic consumption tax on natural gas], EUA, etc.) will only be found through the complete and open-minded understanding of mechanisms resulting from combinations of both national tax policies and European market-type mechanisms – combinations which, due to their nature, are poorly controlled.

Philippe Boulanger

[1] Article R122-14: ‘the emission factor for electricity consumed in France, cited under 2 in III of the same article, is set at 0.76 tonnes of carbon dioxide per megawatt hour. ’

[2] Deliberation by the Energy Regulatory Commission dated 12 July 2018 on proposed regulated tariffs for electricity sales.

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Profesional Experience & Education

Diego graduated in Political Economy at King’s College University (London – 2021). He started his professional career in a family business in Madrid as an operations manager. Diego then studied a Master in Management and Master in Computer Science at IE University (Madrid – 2022), during which he participated as an Information Technology (IT) intern in a startup. In May 2023, Diego joined the HES team as an intern specialised in programming models. In his first project, he developed a software tool for modelling the unavailability of the French nuclear fleet. Afterwards, Diego has also participated in the development of new software tools for modelling price curves, generation asset performance and other topics related to the energy market. 

Diego Marroquin

Junior Consultant

Diego Marroquín

Profesional Experience

Céline joined Haya Energy Solutions in November 2021 as marketing and administration manager. She had a first professional experience in the tourism sector as a social media manager. At HES, her activities are focused on the development of the company’s visibility at European level through: commercial actions, content marketing and development of brand strategy. Céline is also involved in the management of the company’s communication: optimisation of the website (WordPress & Elementor), LinkedIn, publication of the monthly newsletter and the organisation of conferences. Céline participates in energy projects with the clients and acts as coordinator and project manager. Finally, she is in charge of administration (accounting, expenses management, invoicing).   


Céline graduated in Spanish and English Philology at La Sorbonne (France – 2018) and holds a Master’s degree in Project Management and Cultural Tourism (Clermont-Ferrand/ Buenos Aires – 2021). 

Céline Haya Sauvage

Marketing Responsible

Céline Sauvage

Investment Advice

“Decarbonization of the Energy and Transport sectors is arguably today’s main economic driver for the industry.”

Profesional Experience

His career started in civil engineering as a Project Manager in France, Martinique and Australia. Afterwards, he became the General Manager of a subsidiary in Venezuela. In 1992, he established Dalkia in Germany (district heating, cogeneration, and partnerships) and represented Véolia in Thailand. In 2000, he opened the commercial office of Endesa in France to take advantage of the liberalized retail market. From 2006, as a development Manager at Endesa France, he led Endesa’s plan for Combined Cycle generation in France and developed the wind and PV portfolio of Snet at the same time. Philippe Boulanger worked for 3 years at E.ON’s headquarters coordinating the company´s activities in France. He was strongly involved in the French hydro concession renewal project. As a Senior Vice President – Project Director at Solvay Energy Services from April 2012 to February 2014 he was in charge of the H2/Power to gas and European direct market access deployment projects. Philippe has been an HES expert since 2014.


Philippe Boulanger holds engineering degrees both from the Ecole Polytechnique and the Ecole Nationale des Ponts & Chaussées (France) and has a combined experience of more than 25 years in energy and infrastructure. In addition to English, Mr. Boulanger is fluent in French, German & Spanish.

Philippe Boulanger

Electricity Expert


“The world is changing. New investors pay particular attention to the energy sector while historical actors adapt their position to the market.”

Profesional Experience

Antonio started his career in the electricity sector in 1991 working as a member of the General Manager’s team at Sevillana de Electricidad (Spain). In 1997, he was appointed head of commercial regulation at Endesa Distribución. In 2000, he joined the mergers and acquisitions (M&A) department of Endesa Europe. He was appointed Managing Director of Endesa Power Trading Ltd (UK) in 2003. A year later, he became responsible for energy management at SNET (France). In 2008, he was appointed Managing Director of SNET (France). In 2009, he became Director of Corporate Development at E.ON France. In 2011, he founded Haya Energy Solutions (HES), a consulting firm focused on optimising the energy management of consumers, producers and retailers of gas and electricity. From 2015 to 2018, Antonio combined the consulting activity at HES with the general management of 2 production facilities in France (2 CCGTs x 410MW), owned by KKR. At the end of 2018, he joined Asterion Industrial Partners, an infrastructure investment fund, as an operating partner. Antonio currently devotes most of his efforts to the Asterion Portfolio, while advising through HES companies in the energy sector in France, Italy, Germany, UK and Spain. 


Antonio graduated from the Escuela Técnica Superior de Ingenieros of Seville (Spain) and holds an MBA degree from Deusto University (Spain). 

Antonio Haya