Trésor-Info - Publications de la direction générale du Trésor - Public-Policy

The Economic Issues Surrounding Support for Renewable Electricity

2026-02-16T00:00:00+01:00

Renewable electricity, when used to supplement nuclear energy, contributes to achieving the goals of the energy transition. This requires the widespread electrification of uses in transport, construction and industry. Renewables also enable us to reduce our dependence on fossil fuels, which are mostly imported, and thus strengthen our energy sovereignty.

The competitiveness of renewable energy development projects depends on the sector (solar, onshore wind, offshore wind, etc.) and the ratio between their cost and the market price of electricity. In 2025, market prices in France were lower than in most neighbouring countries. While the cost of renewable electricity has fallen sharply in recent years, it has not yet reached the average level of current market prices in France. Hence, the development of these sectors still requires government support.

Support for renewable energy aims to improve the return on investment. Its cost increases when electricity market prices fall, and vice versa. The increase in the volume of renewable electricity receiving support will automatically lead to greater exposure of public finances to market price fluctuations. As a result, support for renewables has had to change, in particular by transferring more of the risks borne by government to producers.

Until 2035, the annual cost of supporting renewable electricity will continue to be dominated by the cost of contracts signed before the end of 2024 (see Chart). As a result of lower generation costs for renewable technologies, the unit support cost for new facilities will be lower than for existing ones. So, for solar and wind power, the average full generation cost for supported facilities should be approximately €80₂₀₂₄/MWh in 2035, compared with €120₂₀₂₄/MWh today, resulting in an automatic reduction in the cost of government support per MWh generated.

Lessons from Past Industrial Policies

2025-02-13T00:00:00+01:00

Industrial policies aimed at the creation and development of specific sectors have made a comeback against a backdrop of a mounting number of crises, trade tensions, an accelerating innovation race and the imperative of combating climate change (see Chart on cover page). A study of policies in eight advanced and catching-up countries from 1945 to 2000 provides useful insight into the conditions determining their success or failure.

Industrial policy had similar aims in all countries studied: (i) growth and competitiveness; (ii) support for major transitions (energy, space, etc.); (iii) strategic autonomy and sovereignty; and (iv) support for declining sectors.

Although different models of industrial policy exist, most countries have intervened in a targeted manner in specific sectors. The catching-up countries (Japan followed by South Korea and China), France and the United Kingdom – up to the 1980s – directly intervened in the development of industrial production capacities. In the United States, sector measures were decentralised and limited to R&D support and government procurement in military and high value-added sectors.

The advanced countries’ sector-specific measures focused on emerging sectors with high stakes in defence- and sovereignty (aviation, energy and space in the post-war period followed, as in the catching-up countries, by electronics and IT). The catching-up countries initially focused on mature, but high-growth-potential mid-tech sectors (automobiles, chemicals and shipbuilding) and then on high-tech sectors (primarily electronics and IT).

International sector-specific industrial policy experiences provide useful insight for shaping today’s policies. For example, the success of both export aid conditional on performance in South Korea and the precise specification of ambitious technological goals in US development contracts suggests that setting high commercial and technological performance targets is a factor for success.

Public Deficit on Target in 2022 Despite the Energy Crisis

2023-07-28T00:00:00+02:00

The 2022 public deficit published by the National Institute of Statistics and Economic Studies (INSEE) on 31 May 2023 stood at 4.7% of GDP. This figure is close to the 5.0% of GDP target set out in the 2022 Budget Bill, as revised on 22 October 2021, and upheld in the two 2022 Supplementary Budget Acts.

However, an imported inflation shock of more than 4 percentage points in 2022 had a strong impact on revenues and expenditure through several channels.

Spontaneous growth of taxes and social security contributions outstripped GDP growth by a wide margin. This major stylised fact was incorporated into the forecasts in the first 2022 Supplementary Budget Bill in July 2022. It stemmed primarily from the components of growth, the strength of wage growth and the large increase in taxable corporate profits in 2021, which has a lagged impact on government revenues.

The inflation shock affected expenditure in two main ways: (i) the indexation of certain expenditure; (ii) the measures implemented since the end of 2021 to protect businesses and households from inflation.

In the fourth quarter of 2021, it was impossible for the Budget Bill to foresee the scale of the energy shock or the measures that would be introduced to support households and businesses. However, the capacity for rapid revisions of forecasts to allow proportionate discretionary tax measures and resolute commitments to the deficit target made it possible to attain a deficit that was close to the original target, despite the shocks affecting revenue and expenditure (see Chart).