Ben Hall in Paris
Published: March 23 2010
The French government on Wednesday said it would abandon its plan to introduce a carbon tax on domestic energy and road fuels unless there was agreement for a European Union-wide levy. The U-turn on the controversial environmental tax come two days after the governing UMP party of President Nicolas Sarkozy suffered a heavy defeat in regional elections. Senior UMP politicians have blamed the defeat in part on the proposed tax, which was due to come into effect on July.
François Fillon, prime minister, told a meeting of centre-right parliamentarians that France would not penalise its industry by introducing the tax unilaterally.
“All decisions taken on the issue of sustainable development must be analysed in the light of our competitiveness,” Mr Fillon told the deputies. “We want the decisions to be taken in common with other European countries otherwise we are going to see a growing shortfall in our competitiveness.”
The decision to ditch the tax divided the government. Chantal Jouanno, the junior minister for the environment, lashed out at the decision saying she “despaired of this retreat”.
Since an EU-wide carbon tax is unlikely to gain approval in months ahead, if at all – the Swedish government pushed the idea with little success during its EU presidency last year – the French levy has, in effect, been shelved.
France would have been the largest economy to impose a levy on energy use linked to a notional price of carbon. France has one of the lowest “carbon footprints” in Europe largely because of 88 per cent of its electricity comes from nuclear plants.
But the government adopted a carbon tax – originally intended to raise €3.5bn a year – to further reduce French emissions by targeting those from households, road transport, and industrial consumption of gas and oil.
Mr Sarkozy had also hoped that carbon tax would pay political dividends by helping to woo green voters to his centre-right party in Sunday’s elections, a calculation the evidently failed to pay off.
The carbon tax plan has had a troubled history.
It should have come into effect on January 1 but at the last minute was ruled unconstitutional by the Conseil d’Etat, an official body that reviews the legality of laws, and was postponed by six months.
The Conseil d’Etat ruled that the carbon tax was unconstitutional because the original tax exempted 1,000 of the biggest industrial emitters, covering 93 per cent of industrial emissions. The government exempted them because they were already covered by the EU emissions trading scheme. The Conseil d’Etat challenged this view, arguing that businesses were given free permits under the EU scheme until 2013.
The government said it would produce a revised tax that would satisfy the Conseil d’Etat’s objections while still exempting the largest businesses, an effort it finally abandoned on Tuesday.
The original tax would have added up to 4.5 cents to a litre of petrol and would have raised domestic gas bills by 7 per cent.
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