A tax lever for investments in green technologies has been announced by the government: the “green industry investments” tax credit (C3IV)

In the context of the introduction of the bill relating to green industry in the Council of Ministers on May 16, 2023, the government announced the establishment a tax credit “green industry investments” (C3IV) in the finance bill for 2024. It will be complemented by additional subsidies that will be put in place for sectors not covered by the C3IV.

 

This tax credit is part of the package of fifteen measures identified by the government to achieve France's environmental and economic objectives in terms of energy transition. 

More specifically, the “green industry investment” tax credit (measure no. 6) is one of the three green industry financing measures announced by the government, with the creation of subsidies and aid for the decarbonization of industries existing ones, in particular by Bpifrance in partnership with ADEME (measure no. 7), and the mobilization of private savings by setting up investments promoting ecological transition (measure no. 8). 

It aims to support companies that invest in green industries, and thus contribute to the objectives of carbon neutrality. 

 

1.     Context  

The implementation of this tax credit is based on the observation that strategic decarbonization technologies (photovoltaic, wind power, electric batteries, heat pumps and green hydrogen) face significant initial additional production costs compared to their fossil alternatives. . 

These additional production costs therefore justify specific support for their development, the framework of which is set by the European Union.[1]. 

 

Furthermore, it has also been observed that the establishment of production chains for these green technologies makes today the object of intense international competition (American IRA[2] or Chinese subsidy policy[3])[4].

Thus, the tax credit investments in green industries" is one of the solutions proposed by the government to avoid the lack of attractiveness and competitiveness of France, compared to the United States and China). 

 

2.     Scope of C3IV

The tax credit “green industry investments” will benefit industrial investments (productive CAPEX), in addition to existing R&D expenditure support schemes (CIR). According to government announcements, this device should be simple to mobilize. 

To benefit from C3IV, companies established in France will have to make tangible investments (such as land, buildings, installations, equipment, machines) or intangible investments (such as patent rights, licenses, know-how or other intellectual property rights) necessary for the production of new generation batteries and key components of batteries, solar panels, wind turbines and heat pumps. 

The base of the tax credit will be equal to the cost of investments in strategic sectors for green reindustrialization and its rate may range from 20% to 45% (European framework). 

3.     Additional subsidies will be put in place for sectors not covered by the C3IV, for example networks and thermal renewable energies

These subsidies may relate to productive CAPEX and Research Development Innovation (RDI) expenditure. They will be based on existing aid schemes (e.g.: Aid for finality scheme regional [AFR], SME scheme), and calls for projects (AAP) already in progress (eg: AAP "Aid for investment in the industrial offer of renewable energies") or to be launched. 

In addition, other support measures for the hydrogen sector should be adopted following the consultations carried out as part of the revision of the national hydrogen strategy, by the end of 2023. 

Measures in favor of carbon-free industry will be guaranteed. These pledges will relate to “brown” expenses[5] which do not contribute to the decarbonisation of the economy. 

All of the planned compensation measures will make it possible to release an envelope of approximately €500 million/year to finance decarbonization measures and the Green Industry tax credit.