The French economy rebounded quickly following the coronavirus crisis, in particular thanks to the acceleration of the vaccination campaign and strong public support measures. Rapid and effective implementation of the recovery and investment plans would help support stronger and more sustainable growth. However, public spending has reached an exceptionally high level, with a mixed performance, which calls for reorganising the fiscal framework to ensure the sustainability of public finances. Education and labour market integration policies will need to be better targeted, with specific training efforts for young people and older workers. Reinforced support for the most vulnerable and less qualified should reduce inequalities, including territorial ones. The transition to a greener economy is the other key challenge that France must take on. Strengthening green investments is crucial to accelerate the pace of emission cuts, as well as putting in place the necessary incentives to foster behaviourial changes, if necessary with targeted support for the most vulnerable.
This study estimates the effect of energy prices and carbon taxation on firms’ environmental and economic performance. The analysis uses data on 8 000 firms that are representative of the French manufacturing sector and observed during 2001-2016. The paper shows that (i) even though a 10% increase in energy prices causes a decline in energy use by 6% at the firm level, this increment has no effect on net employment at the industry level, but it motivates a reallocation of production and workers from energy intensive to energy-efficient firms. Our conclusion calls for complementary labour market policies that minimise costs on affected workers and ease between-firms adjustments in employment.
Read the blog post: Carbon tax, emissions reduction and employment: Some evidence from France