France’s Green Budget for 2026: A good start

On October 24, France published its Green Budget for 2026. Since 2020, the “Commissariat Général au Développement Durable”, a branch of the Ministry for the Transition, is in charge of delivering a yearly report informing both Chambers (Parliament and Senate) on the extent to which the budget is green as well as the fiscal impacts of environmental policies. 

The new 306-pages document is a good example to illustrate and validate the recommendations in our new “Sovereign Transition: Unlocking the investment opportunity” report. 

On the one hand, France is a pioneer and one of the few countries mandating and delivering a Green Budget. This is great and must be commended. 

On the other hand, only a small portion of France’s overall budget is assessed – this leaves aside the bulk of the State’s P&L and leaves entire areas of spending unconcerned by their environmental performance. Moreover, the methodology for assessing environmental impacts is a simple scoring – France mandates precise EU Taxonomy and climate disclosures from its corporate sector but is far less precise when it comes to its own sovereign budget disclosures. This blog looks at those two aspects, coverage and methodology, in turn. 

First, the Green Budget coverage. The total spending screened by government officers is EUR589bn for 2026 - that is nearly all of the operational expenditure  budgeted by France. So far, so good. However, only 9% of this total, or EUR54bn, is considered to have “some form of environmental impact” . This is further split into EUR41bn “green” expenditure, EUR8bn “mixed impact” and EUR5bn “brown” expenditures. 

This therefore leaves 91% of expenses, or some EUR440bn, deemed to be “neutral” or “irrelevant” from a climate and environmental perspective. True, some expenses such as transfers to the EU or local budgets (17% of the total) could be counted elsewhere. But many other spending items perhaps should not be considered as neutral. What about the 10% of health expenses, the 15% for education spending or the 15% for “state’s specific missions”?

The ”state’s specific missions” (missions régaliennes), for example, notably include military spending while the Budget Office (Cour des Comptes) estimates that the military uses about 1.5% of final energy in France, of which the majority is fossil fuel. 

As we have argued in the report on Sovereign Transition, if the State considers its vast majority of expenses as “neutral” from an environmental point of view, such government spending can go on without consideration of impact. This means that investment opportunities that support the reduction of this impact are missed, not seen. The transition will simply not work by investing in a few, pre-identified, green tagged sectors only, such as renewable energy or green transport. It also requires a whole of economy transition to reduce emissions and develop energy efficiency across all sectors and processes. That is, assessment of the impact of the allegedly “neutral” areas in the present approach is urgent. This is what we have recommended in our Sovereign report. 

The methodology for tagging the 9% of “non-neutral” expenses is adapted from Eurostat and the OECD. It is a scoring system, a version of a traffic-light system (with green – light green – brown colours) and sub tagging (1, 2 and 3 detailed nuances of green). For some specific categories of spending, a quota system allocates a green score. For instance, general (non-thermic) building retrofits are considered as having a 23% green impact. So, it is very far from an effective measurement of impact of individual expenses. It is also very far from a Taxonomy tagging, which could help investors see which Taxonomy projects the State is spending on and role-model the use of taxonomies. Ensuring that tagging and scoring are done based on a relevant taxonomy is also a key recommendation of our report on Sovereign Transition. This serves as an alignment tool for both the public and private sector. 

This being said, the detailed report contains a wealth of information on the financial impact of environmental policies for the French budget. For instance a section on the Green OAT (Obligation Assimilable du Trésor, the French government bonds), reaching EUR83bn outstanding as of end 2024. 44% of this amount so far has been allocated to the built environment.  

Also included are a number of follow-up indicators on the effectiveness of green policies, such as the share of low carbon transport in overall transport, the land share of organic agriculture and sustainable forestry, the EPC ranking of social housing, and the share of renewables in power production, among others. 

Finally, the report provides details of the net fiscal earnings from environmental policies. For 2026 the State will cash in EUR30bn, of which EUR20bn are taxes on fossil fuels and Co2. The sale of carbon quotas brings EUR1.5bn and the eco tax on passenger flight EUR1.2bn.