Increasing energy costs will weigh on French exports

So says a recent report by the French think-tank, The Council of Economic Analysis (CAE) analysed by Anne Eveno in Le Monde.  The report, along with advocating the pressing need to invest in innovation, goes on to advise prudence regarding the rate of decommissioning France’s nuclear plants.

According to Le Monde, this CAE report has added a new voice to the debate on energy. Rating the impact of higher energy prices on the competitiveness of enterprises, the report assumes an increase in world energy prices of 50% for oil and gas over the next twenty years, and more than 15% for coal.  Higher fuel prices, coupled with the development of renewable energy means higher electricity prices by up to 30% for households and 16% to 24% for companies by 2017.

The CAE calculates that:

a 10% increase in electricity prices in France would reduce the value of exports by an average of 1.9% and a similar increase in gas prices would reduce the value by 1.1%.

Assuming a 20% increase in electricity prices for industry by 2017,  the value of French exports – excluding energy – would be reduced by 3.8%, a cost 16 billion Euros.  The report notes that:

the effect would be concentrated on the largest exporters in the most energy-intensive sectors

The upshot of the report is on the need to invest in innovation; it suggests that facing the future reality of high energy prices is a powerful incentive to investing in new technologies, products, services and innovations.  CAE acknowledges that research on technical exploitation of shale gas should continue and that

the future of energy prices also requires innovation in energy production, not only in its use.

However, the report emphasize that the use of shale gas in France – in addition to its positive impact on employment and the trade balance – would not effect prices as significantly as in the United States where they fell by 67% in five years.

Here is the full report in English