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Sarkozy launches green tax plan
September 10, 2009 / 11:57 AM / 8 years ago

Sarkozy launches green tax plan

PARIS (Reuters) - French President Nicolas Sarkozy launched plans on Thursday for a carbon tax to encourage industry and households to cut energy consumption.

<p>France's President Nicolas Sarkozy delivers a speech on carbon tax during a trip in Artemare, southeastern France, September 10, 2009. French President Sarkozy has set a new environmental levy at an initial 17 euros ($24.8) per metric ton of carbon dioxide emitted, due to rise progressively over time. REUTERS/Robert Pratta</p>

The levy, initially set at 17 euros ($24.78) per metric ton of carbon dioxide emissions, will translate into a rise in the price of fuel for cars, domestic heating and factories.

“The gravest challenge that we face is climate change ... Every one of our compatriots must feel concerned,” Sarkozy said in a televised speech aimed at winning over a skeptical public.

In the works for months, the tax has caused a political furor in France, with disagreements within the ruling party on how exactly it would work and objections from opposition critics who say it will hurt the poor at a time of economic hardship.

The government has been under suspicion of seeking ways to increase its revenues in a year when fiscal income has plunged because of the recession, causing the budget deficit to balloon.

Sarkozy rejected that criticism, pledging that the carbon levy would not increase the burden on households because the rise in fuel bills would be offset by cuts in income tax.

Those households too poor to pay income tax would receive “green checks” from the state to compensate them for higher energy bills.

Sarkozy faces an uphill battle to convince voters to accept the plan. An opinion poll by Ifop for the magazine Paris Match, published this week, found that 65 percent of people were hostile to the tax.

“The aim of ecological fiscal policy is not to fill state coffers but to incite French people and companies to change their behavior,” Sarkozy said, adding that households that keep energy consumption low could end up better off financially.

The system will differentiate between people who live in urban areas with good public transport and those who live in rural areas and are more dependent on cars. The rural households will get more money back from the state, he said.

The tax, calculated according to the volume of CO2 produced by particular types of fuel, will apply to oil, gas and coal.

A notable exception will be electricity. Sarkozy argued that with 80 percent of electricity produced in France coming from nuclear plants which have low emissions, it would make no sense to increase the price of power.

“What would be the point of on the one hand encouraging French people to acquire electric cars or solar panels and on the other hand to tax them more for those?” he said.

Starting at 17 euros per metric ton of CO2, the tax will rise over time, Sarkozy said, though he did not say by how much or by when. It will be introduced in the 2010 budget, he said.

Some Nordic countries introduced similar carbon taxes in the 1990s and have reported that the measures helped cut emissions without crippling growth. France will be the biggest European economy so far to adopt such a system.

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