Incentives, Externalities, and Unintended Consequences: France's Long Dependence on Diesel

Abstract

This article examines how government incentives shaped France's long-standing reliance on diesel, creating both economic advantages and unintended social costs. After WWII, diesel tax cuts supported recovery by lowering costs for farmers, haulers, and artisans. In the 1980s, facing Japanese competition and a surplus of unused diesel, the government doubled down, aligning fiscal policy with manufacturers specialized in diesel engines. The result: by 2018, 61% of French cars ran on diesel — one of the highest rates in Europe. Yet diesel's hidden costs soon surfaced: increased fine particulate emissions, soaring public health risks, and an estimated 10,000 premature deaths per year. When the state sought to reverse incentives by equalizing diesel and petrol taxation, it triggered widespread protests and the Yellow Vest movement. This paper analyzes the role of incentives in this crisis, evaluates alternative strategies, and explores policy options for a sustainable, health-conscious transport future.

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