Carbon Tax In France's 2010 Budget Definite: Woerth

by Ulrika Lomas, Tax-News.com, Brussels

28 August 2009

Finance Minister Eric Woerth has confirmed that a new carbon tax will be introduced in France within the 2010 budget, he has reassured however that it will not be as heavy-handed as the EUR32 per tonne levy advocated by the specialist advisory panel, headed by former Prime Minister Michel Rocard.

The advisory panel's report, received at the end of July, recommended that France introduce a carbon tax of EUR32 per tonne within its next budget, advocating that it should be expanded progressively to EUR100 per tonne by 2030.

Responding to its recommendations, Woerth stated that the EUR32 per tonne tax was “too much”, and surmised that it would be set lower, acknowledging however that the ultimate decision lies with French Prime Minister, Francois Fillon, and President, Nicolas Sarkozy.

The proposed eco-friendly tax, when first aired in early July, received a warm - yet cautious - reception when French Minister for Ecology Jean-Louis Borloo announced the government's intentions. Borloo sought to quash early concerns by emphasizing that the introduction of a carbon tax in France was not intended to be a punitive measure but instead sought to reward businesses and individuals for choosing eco-friendly alternatives. The minister disclosed that the revenue derived from the green tax would be paid back to both households and businesses, evoking the idea of a “chèque vert” or green cheque as a means to do so.

Although initially well received, the carbon tax proposal has attracted fierce criticism from some areas of French society. Consumer associations, trade unions, and environmental defence movements argue that the tax will merely serve to adversely affect the spending power of individuals, and threaten the competitiveness of French businesses.

The tax will affect all industries, bringing into the tax net industries that currently do not fall under the scope of existing emission trading programmes, most notably agriculture producers and fisheries. It is estimated that, if the proposals maintain their current shape, these industries will be hit disproportionately hard if fuel prices rise, as proposed, by seven to eight cents per litre.

Defending the levy, Woerth underscored that the carbon tax is an important, and intelligent disincentive, paramount to France reaching its ambitious personal target of reducing its carbon emissions to 25% of those recorded in 1990, by 2050.

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