State incentives for environmentally favourable projects

Like its European Union partners, France is committed to the ambitious “20-20-20” target, a policy aiming to reduce carbon emissions and energy consumption by 20% and increase the share of renewable energies to 20% of total energy production by 2020. While this admittedly appears difficult to bring about (and France, with barely 7% in 2006, was second best only to Sweden), the state is anxious to promote energy efficiency and renewable energy power sources in the building sector have been introduced since 2009.

This is good news for house renovation projects, because tax credits and other incentives are becoming increasingly available. Although the sums involved are still relatively modest, they are definitely worth taking the time to obtain, and new projects permitting interest free loans for far larger sums are likely to be introduced in 2009.

Tax credits

For all equipment costs that meet government standards, a tax credit of 50% up to a ceiling of 16000€ is available. This may not be self-evident (I certainly did not find it so!), so let me explain further: For any “green” materials used in a building or renovation project (heat exchanger pumps, solar panels, efficient windows, doors or insulation with a high thermal resistance), 50% of the costs up to a maximum of 16000€ are reimbursed. For example, if I purchase a geothermic heating system costing 16000€, I can then obtain a tax credit of 50%, or 8000€ of that sum. Furthermore, if I only pay 2000€ in tax, this will be cancelled and the state will write me a check for 6000€. Again, if I purchase insulation materials for 5000€ and solar panels for 11000€, I will receive 50% of that sum, or 8000€. On the other hand, if the system cost 20000€, I will still only receive 8000€, because no tax credits above 16000€ are available – this incentive therefore clearly favours relatively small investments.These are subject to change.

Zero interest loans

As mentioned above, tax credits clearly play to the advantage of small scale projects, and bigger budgets fare relatively poorly (although an 8000€ check is always welcome). Rectifying this, and seeking to provide the large scale private projects that are just as necessary to kick start the renewable energy sector, the government intends to provide 0% interest loans (up to a so far unspecified ceiling). These loans will be conditional to comprehensive renovation/building packages: while tax credits on approved equipment were not dependent on other features in the house (for example, there is no legal objection to installing a heat pump in a leaky, draughty house), zero interest loans will demand sweeping, across the board standards. For bigger budgets, providing generously for high quality clean power sources, windows/doors and insulation, the zero interest loan is a highly attractive and powerful incentive (though loans and tax credits will not be cumulative).