France: The Problematic Carbon Tax
Tuesday, September 15, 2009
Making promises is easy. Honouring them is another matter altogether. This is the growing challenge facing President Sarkozy as he tries to implement new carbon taxes. He has promised that the new taxes would not be used an excuse to generate new government revenue – as he emphasised in a speech on September 10 in Artemare, eastern France "every centime taken from households will be given back in other ways". He is finding it difficult to convince people.
The carbon tax will concern oil, heating oil and natural gas but not electricity. It should come into force on January 1st and the tax will be initially priced at 17 euros a ton of C02 for both households and companies.
According to the French President, the carbon tax aims at establishing "a true environmental tax system" to fight global warming: "this new tax only has one goal: to urge households and companies to change their behaviour progressively in order to reduce the consumption of fossil energies". Three months ahead of the Copenhagen conference, Sarkozy wants France, and Europe, to lead the battle against climate change. But for now, such grand schemes will have to be put on hold – the President’s battle for the time being is domestic.
The measure may well be "a very important step" as claimed by Nicolas Hulot, who originally developed this idea during the 2007 presidential election campaign, but it has been heavily criticised, not only by the opposition but also among Sarkozy's own camp.
For starters, the value that the tax will be initially set at has created controversy. The former socialist Prime Minister Michel Rocard, who headed a commission on the subject, recommended an initial value of 32 euros in his report. But a few days before Sarkozy officially announced the measure, Prime Minister François Fillon suggested 14 euros, a value based on market prices. The French President eventually settled at 17 euros, seeking progressive increases in the long term.
The scope of the tax is also contentious. The Greens and the Socialists want electricity to be covered by the carbon tax. And the energy giant GDF Suez has protested against the exclusion of electricity, saying that it would encourage consumers to switch from gas to electricity. "Electricity production in France generates very low greenhouse gas emissions, thanks to nuclear plants", responded President Sarkozy in a recent speech.
Last but not least, some argue that the carbon tax might handicap those working in industries heavily dependent on fossil energies such as farmers or drivers. There will be tax cuts for them, said Sarkozy. But the details remain unclear at this point in time.
More worryingly for the President, two thirds of French people oppose the carbon tax, according to an IFOP opinion poll. Sarkozy has promised that the overall tax burden would remain identical thanks to compensation through a cut in other levies. But even the French Minister of the Economy and Finance, Christine Lagarde, recognised that the burden "would not be fair for everyone", in an interview with television channel Canal +.
Even if the tax is as necessary as Sarkozy insists, a lack of clarity over the details is leading to significant confusion.
Photo copyright Hans Thoursie
