The French government has announced its intention to allocate a significant budget of half a billion euros annually towards a new tax credit for investments that promote environmental sustainability within the industrial sector. Finance Minister Bruno Le Maire unveiled the proposal on Tuesday, highlighting the government's commitment to greening the industry.
This tax credit positions France as the first European Union member state to capitalize on the relaxed European state aid regulations that have emerged in recent months. These regulations were prompted by the introduction of tax incentives in the United States through the Biden administration's Inflation Reduction Act (IRA), which allocated $430 billion towards subsidies. France's initiative sets a precedent for other EU countries to follow suit.
The Ministry of Finance, led by Le Maire, stated that the tax credit will be available on a temporary basis until 2025, in accordance with the new EU regulations. There is also potential for an extension until 2029. It is estimated that this measure will generate approximately 23 billion euros in private investments by 2030 and create 40,000 jobs directly.
The primary objective of the tax credit is to encourage investments in eco-friendly projects, providing a boost to France's industrial sector. European companies face increasing competition from their American counterparts, which have benefitted from significant tax subsidies in the IRA. By incentivizing investments that reduce carbon emissions and stimulate domestic production and manufacturing, France aims to revitalize its industrial sector.
Le Maire emphasized that there is no reason for France to feel inferior in comparison to the United States, noting that various European and existing French aid programs are of a similar magnitude. This tax credit will cover a portion of companies' capital expenditures, ranging from 25% to 40%, for investments in wind and solar power facilities, heat pumps, and batteries.
The tax credit will be incorporated into the 2024 budget law, with the associated costs offset by reducing tax breaks for certain carbon-intensive fuels. The specific fuels subject to reduction are yet to be determined.
Furthermore, the proposed bill includes measures to allocate 2,000 hectares (4,900 acres) of land for new industrial sites. It also aims to streamline the approval process for new industrial projects, reducing the time required from 17 months to nine months.
Additionally, the bill introduces a new category of tax-free savings accounts accessible to individuals under the age of 18 through their banks. The finance ministry anticipates that these accounts will generate 5 billion euros, which can be utilized to finance green industrial projects.
