The French government published yesterday the draft law for the 2023 budget. As we anticipated, it confirmed the plan to increase the level of penalty in case of non-compliance from 2023. It also contains mandate increases for both diesel and gasoline.
The article 8 of the “projet de loi de finance (PLF) 2023” contains the following drafted rules:
- From January 1, 2023, increase of the TIRUERT tax in case of non-compliance with the blending obligations on diesel and gasoline from the current EUR 1’040 to 1’400/cum.
- From January 1, 2023, increase of the TIRUERT tax in case of non-compliance with the blending obligation on aviation fuels from the current EUR 1’250 to 1’680/cum.
- The government comments that “French incentives are less attractive than those of our partners, hampering our ability to achieve our objectives of incorporation. The exceptional context of tensions on the supply of raw materials calls for an evolution of the system from next year”. Implicitly, it confirms that a greater share of the blending obligation is met through the buy-out option in 2022, as we already reported based on market information.
- From 2024, increase of the gasoline blending obligation to 8% e.c, + 0.3% from the 2023 level. The corresponding advanced sub-target would increase to 1.3% e.c.
- From 2024, increase of the diesel blending obligation to 9% e.c, + 0.3% from the 2023 level. The corresponding advanced sub-target would increase to 0.5% e.c.
- From 2024, increase of the aviation fuel blending obligation to 5% e.c, + 0.5% from the 2023 level.
- From 2024, the cap for 9B feedstock used under the diesel obligation would increase to 1.1% e.c, + 0.1% from 2023 in what would constitute the second increase in a row.
- From 2024, the cap for thin juice sugar beet issued from the second extraction (EP2) would increase to 1.1% e.c, + 0.1% from 2023.
Changes proposed for 2024 are comparable to the previous proposal for 2023 (+ 0.3% e.c for both diesel and gasoline). They are not significantly impacting the compliance gap for the diesel segment, which should be in line with 2022 (0.3% e.c to fill with AF C3 or more advanced). The game changer in 2024 could be the wider availability of tickets generated from the electricity supply to the road sector, but this remains complex to anticipate, especially in the absence of the (long due) decree and subsequent Customs guidelines for 2022 that should clarify the rules for electricity accounting.
Our first analysis reveals that the most challenging aspect of the proposal would be compliance with the gasoline obligation. Assuming the 9B cap would be filled with UCO-based bionaptha, which would suggest a dramatic (and challenging) increase of the product’s demand, the compliance gap would jump to 0.6% e.c. If UCO-based bionaptha does not cover 0.9% e.c, then the gap would be even higher. Since most of the biogasoline growth is expected to come from E85 sales, only advanced ethanol could play a significant role in closing this gap. With the increase of the penalty, the French market is set to consolidate its statute of premium payer for advanced ethanol.