Global Policy Forum

France Faces Internal Fight Over Carbon Tax

By Sophie Hardach and Anna Willard

July 29, 2009

France should aim to introduce a tax on carbon dioxide emissions by 2010 to help fight global climate change, a panel advising the government said on Tuesday.

The plan has already drawn fire from intensive fuel users such as farmers and fishermen, and the government pledged to offset any tax with cuts elsewhere while the head of the panel indicated the scheme might have to be delayed.

"Carbon dioxide emissions are a threat to life on the planet ... among the many necessary responses, a significant tax on carbon dioxide emissions is one the most pertinent and efficient," the panel concluded.

France is aiming to divide its greenhouse gas emissions by four by 2050.

Under the carbon tax plan, France would bill 32 euros ($46) for every ton of carbon dioxide emitted in 2010 and lift the levy progressively to 100 euros per ton by 2030.

This would add between 7 and 8 cents to the cost of a liter of petrol. The tax will affect all sectors that are not part of existing emissions trading programs.

The report is expected to provide the basis for legislation, due to be debated after parliament's summer break. It will face intense discussion as details are thrashed out.

"This is the beginning of a wider process of reflection and consultation," Economy Minister Christine Lagarde said after the report was presented.

While most politicians agree emissions must be cut to fight global warming, a key part of the debate is on how to compensate poorer households, workers in certain sectors and those who need to drive because they work at night or live in rural areas.

"This contribution will be strictly offset by a cut in other contributions, so that the purchasing power of households and the competitiveness of companies will be ensured," Environment Minister Jean-Louis Borloo and Lagarde said in a statement, reiterating an earlier pledge.

"Umpteenth tax"

But the idea of such a compensation has attracted criticism from budget watchers who point to France's growing debt burden -- already exacerbated by the economic crisis.

The extra cost would vary according to the size of households and their location. The report said a couple with children living in the country could pay about 303 euros a year extra, while a single parent family in a big city might pay only 78 euros a year extra.

The levy would bring between 8-9 billion euros to state coffers, divided roughly equally between households and businesses, the report said, although the level of the tax will be one of the key points under discussion.

Borloo said the final result could be no more than 2-4 billion euros and business daily Les Echos said the levy could be set at just 15 euros per ton instead of 32 by the time it is approved.

Given the scheme's complexity, former Socialist Prime Minister Michel Rocard, who chaired the panel, said he did not know if it would in fact be ready in 2010.

"The best would be for it to be ready in 2010 but it's true that all these details ... are complicated," he told French radio earlier on Tuesday.

The opposition Socialists supported the proposal but said companies should be prevented from passing on the cost to households, and that people living in areas where they had to use the car should not be disproportionately punished.

Business associations, on the other hand, worry that the tax may hurt their competitiveness.

"The carbon tax should not be an umpteenth tax used for filling up the state coffers," the small business union, the CGPME, a small business union, said in a statement.

Sweden, which holds the rotating European Union presidency, will soon present an EU-wide carbon tax plan. Sweden, Denmark and Norway already have carbon taxes in place and China has been studying the idea.



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