The tariff shield on electricity prices for the most affluent households must be ended in order to reduce its cost while encouraging energy sobriety, argue three economists in a note published on Tuesday by the Conseil d’analyse économique (CAE).
Reducing electricity consumption: easy exclusions or energy cheques for those on low incomes
“Given its impact on public finances, a return to the regulated tariff (for electricity, editor’s note) should be considered, with a quicker exit from the shield for the most affluent households, while the most modest would continue to benefit from support,” recommend Xavier
Jaravel, Isabelle Méjean and Xavier Ragot.
The wealthiest 20% of households could thus be excluded from the tariff shield, a measure that would “generate budget savings of 5 to 6 billion euros”, according to Xavier Ragot. Another option would be to distribute an energy voucher to the most modest households.
“Both approaches would provide incentives to reduce electricity consumption” and achieve “substantial budget savings”, say the researchers. For Xavier Ragot, the tariff shield has achieved its economic objectives by supporting business activity, preserving household purchasing power and significantly reducing the price of electricity.
The electricity tariff shield: between household protection and economic challenges
According to estimates by the French energy regulator, electricity prices would have jumped by 35% in 2022 and 100% in 2023 without this protective measure. On the other side of the coin, by supporting demand for energy partly imported from abroad, the shield has contributed to widening France’s trade deficit.
Another drawback is that it has increased direct household CO2 emissions by 2.5% compared with a world without the shield, calculate the authors. In April, Economy Minister Bruno Le Maire announced that the tariff shield limiting electricity prices for private customers would be maintained until the beginning of 2025. At the end of last year, the government estimated that the energy shield would cost households, local authorities and businesses 110 billion euros between 2021 and 2023.
For future energy crises, the economists recommend a scheme similar to the one implemented in Germany, based on past household consumption, e.g. the assumption of “40% of the previous year’s bill”. All this with a ceiling on the amounts paid out, to ensure that the system “does not use public money to finance the biggest consumers, which we know to be the richest households”.
The researchers acknowledge that implementing a subsidy based on past consumption would require “an overhaul of the statistical apparatus”. In future, they argue, it will enable “better-targeted public support policies” to be put in place, and a better a posteriori evaluation of their effectiveness.
