EU electric vehicle rule predicted to cost France an eye-watering €72 billion a year

The EU’s plan to end the use of combustion engine vehicles by 2035 will cost France an enormous amount of money to achieve, argued economist Rémy Prud’homme in a piece published by Climato-realistes. He first argues that it is not clear whether the EU is demanding France make 100 percent of cars sold electric, or if it is to completely replace all vehicles with electric cars.

He claims: “Ideologists are not interested in these details. They are even less interested in the costs and implications of the targets they want to impose.”

The impact on public finances of the electric revolution is twofold, argues Mr Prud’homme.

He says: “On the one hand, it implies an increase in public expenditure, due to the subsidies for electric vehicles.

“On the other hand, it implies a decrease in public revenues, as it means the disappearance of heavy taxes on thermal fuels.”

By analysing the subsidies currently available to electric vehicles, the economist estimates that the average subsidy is around €12,000 – just over £10,000.

By extrapolating this to the scenario in which all cars sold are electric, Mr Prud’homme estimates that this adds up to an average of €16billion per year for government subsidies between 2022 and 2035.

The situation worsens, however, if the aim is to completely replace all cars with electric vehicles. If this is the case, the economist estimates that it will cost France roughly €32billion (£27billion) in subsidies a year.

He adds that these subsidies are “essential” for the policy to succeed, and argues that “in the minds of many environmentalists, and no doubt also of European Commission officials, ‘100% electric in 2035’ refers to the total elimination of non-electric vehicles from our roads.”

The costs are even more significant when taking into account the amount of tax that will be lost on internal combustion vehicles.

The 37 million non-electric cars – or more specifically, their fuel – are currently taxed at roughly 38 billion euros per year. Petrol and diesel are the most taxed goods in France after tobacco.

Therefore, as more cars on the road become electric, less and less is made for the French government in fuel taxes.

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If the aim is to only sell electric cars by 2035, then the total loss in taxes for the government is estimated by Mr Prud’homme at €101billion – an average of just over seven billion euros a year.

However, as before, the result is even more damaging if the EU insists France must replace all its cars with electric vehicles.

The tax loss in this case is estimated to be €266billion – just over £224billion.

Mr Prud’homme concludes: “In total, for public finances, the electrification of the fleet imposed by the European Union will cost the French public finances in 2035 about 72 billion euros.”

This is roughly equivalent to a loss in public money of over £60billion.

Mr Prud’homme also points out the importance of the car manufacturing industry to France as a whole, stating that “car manufacturing, i.e. the production of internal combustion vehicles, is one of the (too few) strong points of French industry”.

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He said: “It will be very seriously affected by this scenario.

“The production of combustion engine cars will totally disappear in 14 years. It will of course be partially replaced by the production of electric vehicles.

“However, a large part of the stock of machines and knowledge, which ensured the production of non-electric vehicles will be rendered obsolete, useless, devalued and scrapped.”

He uses the example of the Société Aveyronnaise de Métallurgie foundry, which employs 350 specialised workers and sophisticated machinery – which will now be closing.

He argues that neither the workers nor the machines will be able to be used to produce batteries for electric vehicles, adding: “This destruction of knowledge and capital has a cost, difficult to estimate, but considerable.”

Additional reporting by Maria Ortega