Skip to main content

France – EHS Candidate for Reform

Excise tax refund for fuel used in agriculture

The subsidy aims to support agriculture, forestry, horticulture, pisciculture sectors and rural development by fostering competitiveness and economic sustainability. It provides a reduced tariff of the excise tax on off-road gas oil, heavy fuel oil, natural gas and liquified petroleum gas (LPG) used in agricultural practices. For off-road gas oil, a partial refund is also available. The support scheme came into force in 2004 and was modified in 2019. The subsidy makes the use of fuel cheaper for farmers. This lowers the production cost, reduces the incentive for fuel efficiency and increases agricultural production. Similar subsidies exist in Belgium, Cyprus, Finland, Germany, Portugal and Spain.

© Steven Weeks / Unsplash

The budget impact of this subsidy was EUR 1,420 million in 2021. If the subsidy were abolished, the price of natural gas would increase by 12% and by 6% for LPG. The cost of diesel and heavy fuel would have a much more substantial increase of 112% and 42%. The decrease in fuel use would also vary from 1.2% for LPG to 22.4% for off-road gas oil.

The environmental impacts caused by the subsidy include increased GHG emissions and air pollution, more use of resources and biodiversity loss. The abolishment of the subsidy would reduce CO2 emissions by 680,000 tonnes. It would also lower the use of resources, such as land and water.

Some modifications to the excise rate for off-road gas oil are foreseen in the near future. It is planned to phase out the subsidy in 2023, although the price for agricultural users will not change. The tax refund of EUR 3.86 cents will be phased out, but this rate will be directly applied as a tax reduction for farmers purchasing off-road gas oil. Completely phasing out the subsidy will need compensation measures to be developed to alleviate the increase in production costs. Options for reform could include lump-sum payments, gradual reform to allow farmers to adapt, and energy efficiency support.

More information on the excise tax refund for fuel used in agriculture and other candidates for reform in France and other Member States can be found in the country case studies and factsheets compilation.