FRANCE DROPS CARBON TAX

France Abandons Plan for Carbon Tax
Matthew Saltmarsh, March 23, 2010 (NY Times)

"After months of political rancor and legal obstacles, the French government…[has] shelved its plan to introduce a tax on carbon emissions that had been a cornerstone of President Nicolas Sarkozy’s enviromental policy.

"Ministers and members of the governing UMP party said the tax would put French companies at a disadvantage to their European neighbors, most of whom do not pay anything similar…But analysts said the drubbing handed to the center-right government… in regional elections brought the U-turn from Mr. Sarkozy…"

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"…[B]y arguing that the measure needs to be supported by France’s European partners, [Prime Minister François Fillon and the Sarkozy] government is effectively burying the tax…Sweden, Denmark, Ireland and Finland…have already implemented carbon taxes, but [more competitive] countries, including Germany and the Netherlands, would probably be reluctant to go along. Britain and Poland are generally opposed to any tax harmonization…

"The tax was initially presented by Mr. Sarkozy as an environmental policy with long-term fiscal benefits…Many environmentalists had praised it as a bold attempt to… directly alter consumer behavior to benefit the environment…Emissions by households and business were to be taxed at a rate of €17 per ton of carbon dioxide emissions. It was set to come into effect on Jan. 1, by imposing direct levies on gasoline, gas and coal use."

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"Estimates vary on how much it would have raised…[probably] in the region of €4.5 billion annually, with about 55 percent from households and 45 percent from companies…[D]iscounts or exemptions were announced for industry and agriculture, including for truckers, farmers and fishing fleets. For households, offsetting tax breaks were envisaged…effectively [making] the tax revenue-neutral, at least for the short term.

"…France’s constitutional court ruled at the end of December that it would violate principles of equality because of the range of industrial emissions that would be exempt…The opposition Socialist party had complained that the tax would unfairly penalize low earners…[and] stressed the complexity of implementing the tax and the problems that it could bring for French companies…Socialists almost swept the board in the [most recent] regional poll, leaving them and their allies in control of 21 of 22 mainland regions plus Corsica…and prompting the] government’s latest decision [which] was welcomed by businesses…"