France: Stakeholders Call for Review on Proposed Tax Policy on Natural Gas
By Ndubuisi Micheal Obineme
..warns the government on the consequences of imposing a tax on natural gas used for hydrogen production.
Paris, France – Three prominent French associations have called on the government to review the proposed tax policy on natural gas used for hydrogen production, explaining that natural gas remains the main hydrogen manufacturing process which is currently insufficient to meet the needs of industry players in France as of today.
As part of the government reforms of the 2025 finance bill, contained in article 7, the French government established a new tax policy on natural gas consumed for the production of hydrogen, which was adopted at the end of November 2024 by the Senate.
In a statement made known to The Energy Republic, the new tax system would mainly be imposed on industries using hydrogen in their processes, such as the chemical and refining sectors.
Meanwhile, hydrogen is produced mainly by steam reforming of natural gas. This production method represents 94% of hydrogen production in France. France produces nearly 1 million tonnes per year. This production is responsible for the emission of 11.5 Mt of CO2, or approximately 3% of national emissions.
Currently, hydrogen is mainly used as an input in industrial processes, as a chemical reagent. In other words, it is necessary for the manufacturing process of various goods (production of fuels and other finished petroleum products, glass, methanol, fertilizers, ammonia, manufacturing of textile fibers, electronic metallurgy, etc.). It is particularly essential in the refining sector to remove impurities present in crude oil. In the chemical industry, it is used to produce ammonia and fertilizers.
According to published reports, about 430 Kt of hydrogen is consumed each year by these sectors in France. Some hydrogen production facilities are integrating CO2 capture technologies to reduce their carbon footprint.
In response to this new tax policy, the French associations – France Gaz, France Chimie, and Ufip Énergies stated that the additional tax would have negative effects on France’s energy sector including consumers, and would also weaken companies, especially the French companies who are already facing serious financial difficulty.
According to them, several fertilizer plants and sites in the refining sector have been shut down in recent years due to financial difficulties.
Compared to their North American competitors, they stated that European hydrogen producers had already incurred an additional cost of around €30/MWh, based on the price of natural gas and the European carbon market.
They said, “The introduction of a tax, even a reduced one, on hydrogen production would be a brake on the industries concerned, which will not be able to both generate the expected tax revenues and invest fully in decarbonization projects.
“It would also compromise the decarbonization projects included in several ecological transition contracts signed by the State and major industrial sites.
“At a time when there is an urgent need to preserve or restore the competitiveness of our industries, there is no justification for creating this new tax, which further weakens French factories in the face of international competition and undermines their decarbonization roadmap.”
About France Gaz:
France Gaz (www.francegaz.fr) represents the French gas sector in charge of all combustible gases (natural gas, renewable gases, liquid gases, hydrogen). It brings together gas players present throughout the gas chain committed to producing renewable gases, aiming for carbon neutrality by 2050, ensuring France’s security of supply, and enabling all customers to be committed players in the energy transition. A member of the Conseil Supérieur de l’Énergie and Medef, France Gaz is also a member of the European associations: Eurogas, Marcogaz, and the International Gas Union.
About France Chimie:
France Chimie (www.francechimie.fr) is a professional organization that represents the companies involved in Chemistry in France. It promotes in France responsible and creative Chemistry. With 4,000 companies in France and 228,000 employees in the sector, Chemistry provides the substances and materials essential to all sectors of the economy.
About Ufip Energies and Mobilities:
Ufip Énergies et Mobilités (www.energiesetmobilites.fr) is the professional union that covers the production and distribution chain of all forms of energy in France. It brings together companies operating in France in the following liquid energy sector activities: industrial platforms, logistics, underground storage, distribution, and production of underground resources. Committed today to the decarbonization of their industrial processes and products, all its members are resolutely transforming themselves by increasingly integrating innovative carbon reduction processes and the production of decarbonized liquid energies – such as low-carbon liquid fuels including synthetic fuels, low-carbon hydrogen or CO2 capture and storage -. They are investing in the energy transition to provide sustainable solutions to achieve France’s climate objectives.
