BEO3430

International Economic Analysis

Assessment 2: Industry Project

Student Name: Hew Zi Jin

Lecturer’s Name: Ms Dharshini
Block: Block 1

pg. 1
Table of Contents
Introduction......................................................................................................................................3
France..............................................................................................................................................4
France Budget Act 2010..............................................................................................................5
Subsidies for EDF........................................................................................................................6
Germany..........................................................................................................................................7
2021 Renewable Energy Sources Act..........................................................................................8
Research and Development.........................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

pg. 2
Introduction
The energy sector helps us to carry out our daily activities and is important to help keep our
society functioning. This is because the energy sector is responsible for producing and supplying
energy to us. One of those energy sources that is supplied to us is electricity and is under the
electric power industry or the electrical industry. This report will focus on the electrical power
industry in France and Germany, to compare in the directions that they have decided on electrical
generation and to discuss the subsidies and policies they have implemented to further the goal of
reducing carbon emissions.

The country of France has a heavier emphasis on developing in nuclear energy. The first nuclear
power plant that is commercially used and connected to the grid in 1963 (I2EN, 2023). In 1973,
they faced an oil crisis and embargo from the Arab nations (CVCE, 1973). The reason France
chose nuclear energy is because they do not have natural energy resources like coal and natural
gases (World Nuclear Association , 2023). They also use other sources to generate electricity
such as coal, natural gas, biofuels, and waste, as well as oil.

Germany on the other hand, focuses on renewable energy such as solar and wind. Germany has a
bad view or opinion on nuclear energy. This is due to the influence of the Green Party, which is a
result of the protest against nuclear power back in the mid-1970s (The Economist , 2022).

Both France and Germany are a part of the European Union, which commit to cut greenhouse
gases by 55% by 2030 and to be carbon neutral in 2050 (European Council, 2023). Both
countries being the larger and more influencing nations in the union, they are more likely to be
proactive in achieving the goals.

pg. 3
France

Co2 Emission of France for the Electrical power

Industry
400

350 340.05 326.97 330.81 331.13

304.52 307.17 311.21
299 300.23 293.74
300
260.94
Co2 Emissions(Mt)

250

200

150

100

50

0
2 0 10 2 0 11 2012 2013 2 0 14 2 0 15 2016 2017 2 0 18 2 0 19 2 0 20

Year

Figure 3.1 Graph of CO2 emissions of Electrical power industry in France from 2010 to 2020

The Graph above shows the CO2 emissions of France of the Electrical power industry from the
year 2010 to 2020 according to the International Energy Agency (International Energy Agency,
2021). The graph shows a downward trend since 2010, this could be due to the government
policies in France to help with the reduction in CO2 emissions when generating, transferring,
storing, and consuming electricity.

pg. 4
France Budget Act 2010

One of these policies is the introduction of a carbon tax under the Budget Act for 2010
(European Union, 2009). This policy aims to encourage low-carbon emitting behavior to
households as well as companies on energy products sold, used, or intended for use as fuel
(European Union, 2009). The examples of low-carbon emitting behavior can be like carpooling,
turning off electrical appliances and utilities when not in use to the amount of waste that is
produced.

Electricity Demand in France

Price (€)

Quantity (Kw/h)

QD QS QD after tax

Figure 3.2 Assumption Graph of Supply and Demand for the consumption of electricity

This policy will most likely deter the consumers from consuming unnecessary electricity from
being taxed. The tax is initially set at 17 Euros but will gradually increase towards 100 Euros
(European Union, 2009). As explained above, this policy increases the price of electricity, this
will decrease the amount of electricity demanded, moving the quantity demanded line (QD) to
the left. As the quantity demanded by the consumers is decreased, the consumption and waste of
electricity will result in lower carbon emissions indirectly (International Energy Agency, 2019).

pg. 5
Subsidies for EDF

Besides from the policy mentioned above, which reduces consumption and demand of electricity,
France also plans to subsidize its state-controlled energy group EDF to help build more nuclear
reactors (Balkan Green Energy News, 2023). The argument for nuclear energy and the building
of nuclear reactors is because that nuclear fission does not produce any CO2 (World Nuclear
Association, 2022). This means that emissions of greenhouse gases only occur indirectly, such as
during the construction of the plant but not during the electrical generation process (World
Nuclear Association, 2022).

Positi ve Consumpti on Externality of Electricity in

France
Price(€)

Quantity(KW/H)

QD(MPB) QD(MSB) QS(MPC)

Figure 3.3 Assumption Graph of Positive Consumption Externality in France

There are many reasons to expand and subsidize the energy and electrical power industries. We
can find some of these reasons in the positive externalities of electricity that may occur. Two of
the most obvious examples of positive externalities are the greater stability in the supply of
electricity as well as improved access to electricity for rural areas (Climate Policy Watcher,
2023). It may also produce more available jobs for the population as workers are needed to
operate and maintain the facilities.

pg. 6
Germany

CO2 Emissions Of germany for the electrical power

industry
900
800 758.85 745.14 763.65 734.49
731.24 723.11 729.68 718.79 694.54
700 645.4
589.99
Co2 Emissions(Mt)

600
500
400
300
200
100
0
2 0 10 2 0 11 2 0 12 2013 2014 2 0 15 2016 2017 2018 2019 2020
Year

Figure 4.1 Graph of CO2 emissions of Electrical power industry in Germany from 2010 to 2020

The graph above shows CO2 emissions of the electrical power industry in Germany from 2010
to 2020 according to the International Energy Agency (International Energy Agency, 2021). The
CO2 emissions for Germany also shows a downward trend similar to France. However, we are
able to see that the amount of CO2 emissions of Germany are around twice of that of France.
This could be due to their reliance on natural gas, coal, and oil for most of their electrical
generation (International Energy Agency, 2021).

pg. 7
2021 Renewable Energy Sources Act

One of the policies that Germany has enacted is the 2021 Renewable Energy Sources Act. This
policy charges a tax on the consumer’s electricity bill in order to support their renewable energy
initiatives. The tax will be at around 0.065 Euros per kWh in 2021 which is decreased from
0.0675 Euros in 2020 (International Energy Agency, 2023). This will mean that we will most
likely see an increase in demand and consumption of electricity.

Electricity Demand of Germany after the En-

actment of New Policy
Price(€)

Quantity(kW/h)

QD (old policy) QD (renewed policy) QS

Figure 4.2 Assumption graph of electricity demand of Germany

The policy mentioned above would increase the demand for electricity, moving the demand
curve to the right. This policy’s intention is to fund renewable energy initiatives and industry,
which is an indirect way to decrease CO2 emissions by encouraging and funding the renewable
energy industry. Following the increase of demand, it is also very likely that the funds gathered
from the tax that is levied would accelerate the growth of the renewable energy industry as the
eventual increase in price from the increase in demand would also lead to an increase in supply.

pg. 8
Research and Development

Another way that Germany encourages in the reduction of CO2 emissions is through research
and development. The Federal Ministry of Education and Research (BMBF) is the main
institution that is responsible for the research of renewable energy sources for Germany. One of
the projects that they have initiated is the large-scale wind plant project in 1974 (Mischa
Bechberger, 2004). The German government also poured in around 2.05 billion Euro between
1980 to 1998 to help with research, with 1999 to 2001 having an annual expenditure around 89
million to 103 million Euros (Mischa Bechberger, 2004).

The North Rhine-Westphalia region also hosts multiple research facilities that are funded by the
government. Their focus is to support innovative measures and technologies in order to reduce
the CO2 emissions that allow for the increase use of renewable energies, the stability of their
electricity grids, and the increase of energy efficiency (Braun, 2019)

pg. 9
Conclusion
Based on the specificity rule, which states that we should solve a problem with the most direct
solution with the least economic cost, I would suggest that research and development would be
the best policy for Germany. This is because it can help with finding new methods for electrical
generation, storage, transmission as well as consumption. Besides that, the tax on electricity
consumption is an indirect method to solving the issue. However, the tax would lessen the
burden on the government in terms of the cost of the development of renewable energy sources.

For France however, I would think that the better policy out of the two stated here is the
subsidies it gives to its energy company. This is because of the benefits that they have for using
nuclear energy, with the fact that there are no emissions during the electricity generation process
as well as the amount of electricity that they can produce helps keep the cost of electricity for the
consumers to be low. Alongside the fact mentioned before, the lack of natural resources like coal
and natural gas meant that nuclear would be the optimal solution for self-sustenance.

Moreover, just like the tax in Germany, the tax in France for its consumer is an indirect way to
solve the issue of CO2 emissions. This is because the main cause of the tax towards its
consumers is to promote energy efficiency or low-carbon behaviors.

A noticeable difference in the two countries are the sources that they use for electrical
generation, and therefore the difference in the amount of CO2 emissions. France which uses
majority nuclear energy have a lot less emissions compared to Germany that still uses most of
the coal, oil, and natural gas.

France and Germany also have its similarities in terms of the policies that they adopt in order to
resolve the carbon emissions problem as both of them tax their consumers on the consumption of
electricity as an indirect way to reduce emissions. This can also be because of the extra revenue

pg. 10
that they receive in order to further their development in public services such as electrical power
industry that we are discussing about.

References
Balkan Green Energy News, 2023. France to extend operating life of its nuclear power plants.
[Online]
Available at: https://balkangreenenergynews.com/france-to-extend-operating-life-of-its-nuclear-
power-plants/
[Accessed 4 March 2023].
Braun, D. J. F., 2019. Energy R&D, The Hague: The Hague Centre for Strategic Studies.
Chen, J., 2022. Energy Sector: Understanding What Types of Companies Comprise It. [Online]
Available at: https://www.investopedia.com/terms/e/energy_sector.asp#:~:text=our%20editorial
%20policies-,What%20Is%20the%20Energy%20Sector%3F,and%20gas%20drilling%2C
%20and%20refining.
[Accessed 22 February 2023].
Climate Policy Watcher, 2023. Externalities as benefits and drawbacks of energy efficiency.
[Online]
Available at: https://www.climate-policy-watcher.org/energy-efficiency-2/externalities-as-
benefits-and-drawbacks-of-energy-efficiency.html
[Accessed 4 March 2023].
CVCE, 1973. Oil Crisis in France. [Online]
Available at: https://www.cvce.eu/en/obj/oil_crisis_in_france_30_november_1973-en-9d4040f5-
5a3b-424f-979e-929e574ca88e.html#:~:text=On%2016%20and%2017%20October,is%20the
%20first%20oil%20shock.
[Accessed 28 February 2023].
European Council, 2023. Climate Change : what is the EU doing. [Online]
Available at: https://www.consilium.europa.eu/en/policies/climate-change/#:~:text=Under
%20the%20European%20climate%20law,EU%20climate%20neutral%20by%202050.
[Accessed 28 February 2023].
European Union, 2009. French Climate Plan. Paris: Le Grenelle Environment.
I2EN, 2023. Brief History of Nuclear Energy in France. [Online]
Available at: https://www.i2en.fr/en/brief-history-of-french-nuclear-energy/
[Accessed 28 February 2023].

pg. 11
International Energy Agency, 2019. Emissions savings. [Online]
Available at: https://www.iea.org/reports/multiple-benefits-of-energy-efficiency/emissions-
savings
[Accessed 4 March 2023].
International Energy Agency, 2021. France. [Online]
Available at: https://www.iea.org/countries/france
[Accessed 2 March 2023].
International Energy Agency, 2021. Germany. [Online]
Available at: https://www.iea.org/countries/germany
[Accessed 4 March 2023].
International Energy Agency, 2023. Germany's Renewables Energy Act. [Online]
Available at: https://www.iea.org/policies/12392-germanys-renewables-energy-act
[Accessed 5 March 2023].
Mischa Bechberger, D. R., 2004. Renewable energy policy in Germany : pioneering and
exemplary regulations. Energy for Sustainable Development, 8(1), pp. 47-57.
The Economist , 2022. Why Germans remain so jittery about nuclear power. [Online]
Available at: https://www.economist.com/europe/2022/01/08/why-germans-remain-so-jittery-
about-nuclear-power
[Accessed 28 February 2023].
World Nuclear Association , 2023. Nuclear Power in France. [Online]
Available at: https://world-nuclear.org/information-library/country-profiles/countries-a-f/
france.aspx#:~:text=This%20decision%20was%20taken%20in,and%20achieving%20greater
%20energy%20security.
[Accessed 28 February 2023].
World Nuclear Association, 2022. Carbon Dioxied Emissions From Electricity. [Online]
Available at: https://www.world-nuclear.org/information-library/energy-and-the-environment/
carbon-dioxide-emissions-from-electricity.aspx#:~:text=Over%2040%25%20of%20energy
%2Drelated,not%20produce%20any%20CO2.
[Accessed 4 March 2023].

pg. 12