France's Sarkozy urges carbon tax

Last Updated: Sat, Sep 12, 2009 03:35 hrs

French President Nicolas Sarkozy wants to tax carbon dioxide emissions by households and businesses, a measure aimed at helping France slash its output greenhouse gases over the coming decades — but viewed with skepticism by many.

In a highly anticipated speech on the subject, Sarkozy sought to convince his compatriots of the need for the carbon tax, which surveys show around two-thirds of the French oppose. France would be the largest economy to impose one so far.

Sarkozy said that faced with threats to the climate and the need to reduce its dependence on oil, "it is time for France to profoundly adapt its taxation system and create real ecological taxation."

The tax would be initially based on the market price for carbon dioxide emissions permits, which is now €17 ($24.74) per ton of carbon dioxide, Sarkozy said. At that level, the government expects to raise €3 billion, which will be entirely returned to households and businesses through a reduction in other taxes or repaid via a so-called "Green Check," Sarkozy said.

The result would be a shift of the tax burden from other revenue sources to energy derived from fossil fuels in an effort to discourage their use.

Gasoline, diesel fuel, coal and natual gas will be subject to the tax, but not electricity, Sarkozy said. France generates most of its electricity via nuclear power, which doesn't emit greenhouse gases.

The tax would add 4.5 euro cents to each liter of diesel, 4 cents to each liter of gasoline and 0.4 cents for each KWh of natural gas consumed, Sarkozy said. The tax is intended to rise gradually from this level, Sarkozy said.

The plan, dubbed a "carbon tax" by most observers despite the government's effort to brand it as a "climate-energy contribution," has stirred passionate debate in France, where surveys say most voters oppose the idea.

France would be the largest economy to levy such a tax, though some smaller European countries already tax household carbon dioxide emissions, including Sweden, Denmark, Finland and Slovenia.

France hopes to play a leading role at a U.N. meeting in Copenhagen, Denmark, this December aimed at striking a pact to succeed the Kyoto Protocol, which bound 37 industrial countries to reduce greenhouse gas emissions by 5.2 percent of 1990 levels by 2012.

The idea for a tax on carbon emissions has been debated in France since at least 2007, when it was part of the electoral platform of presidential candidate Nicolas Hulot, a television star and environmentalist. General outlines for the proposed tax were hashed out by experts led by former prime minister Michel Rocard earlier this year.

In the absence of details on the tax's size and how it would be levied, the debate has bogged down in recent weeks, with confusion and contradiction even within the conservative government.

Prime Minister Francois Fillon told a newspaper last week that the tax would be €14 ($20.20) per ton of C02. Sarkozy quickly stepped in and said nothing was yet decided. The Rocard commission had suggested a price of €32 ($46.15) per ton of C02.

A tax of that size would raise €8 billion ($11.5 billion), which the government has pledged to redistribute through cuts in other levies and charges.

A poll published Thursday in the magazine Paris-Match showed 65 percent of French people opposed the tax and 34 percent in favor.

The survey by the IFOP polling agency also showed that opposition to the tax crossed political lines, with 56 percent of Green Party voters and 60 percent of Sarkozy's own UMP party voters against the carbon tax. The poll questioned 1,007 people by telephone on Sept. 3 and 4. No margin of error was given.

Sarkozy has brushed aside the criticism, saying in comments reported by the French press that the carbon tax was similar to other major reforms that were originally unpopular in France, such as decolonization and the repeal of the death penalty.

For individuals, a tax of €32 per ton of C02 would amount to an average additional €160 ($230) per year, half on heating gas and half on gasoline or diesel fuel, said Gael Callonnec, an economist at the French Environment and Energy Management Agency, a public agency that advised the government on the plan.

A tax of this size would be equivalent to an 8-centime increase in the price of a liter of unleaded gasoline (roughly 3 US cents per gallon), Callonnec said.

Hulot, the ex-presidential candidate, told the French newspaper Liberation that the tax should progressively increase to around €100 per ton of C02 by 2030.

France under Sarkozy has sought to catch up to, and eventually surpass, European neighbors with "greener" reputations. Last summer France's parliament passed a sweeping law that says the country should reduce its carbon emissions fourfold by 2050 and increase renewable energy sources to 23 percent of total energy production, about double current levels.

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