FRANCE: Carbon tax for businesses with a ‘get out’ clause for energy-intensive industry

Reaction to the 96 measures contained within France’s new national climate change strategy has been mixed. As in the UK, plans for a tax on companies’ carbon-based energy consumption have led to threats from businesses that such a tax will reduce their competitive edge.

From 2001, a 150ff/tonne tax will be applied to businesses’ emission production (calculated on their carbon-based energy consumption) and that will rise to 500ff by 2010. Like the UK’s Climate Change Levy, the French tax is ‘balanced’ through the introduction of reductions in the firms’ employee taxation.

The French climate change plan proposes to allow energy-intensive industries a ‘get-out’ clause in the form voluntary reductions. Environmentalists argue that by reducing employee tax and increasing energy taxation, governments can encourage businesses to employ more people at the same time as creating incentives for reduced emissions of greenhouse gases. But energy-intensive industries that employ comparatively few people say that they cannot restructure in such a way.

In addition to voluntary targets for energy-intensive industries, France has changed its tune on emissions trading and the national climate change plan has positive things to say about emissions trading for businesses that can’t or won’t reduce emissions. Acknowledging that development of emissions trading will require action on the EU level, the French presidency of the EU – in the second half of this year – may offer an opportunity to kickstart a trading system.

References to emissions trading has angered French environment minister, Dominique Voynet, according to Le Monde. The paper suggested that Voynet had not been made aware of the positive comments on emissions trading contained within the plan and quotes her as saying: “The cynical and brutal fact is that the public sees [emissions trading] as being about buying the right to pollute. Those who defend such pollution permits are above all those who don’t want to see any change”.

Another area of contention is the issue of transport-related emissions. Environmentalists have criticised the measures – aimed at stabilising transport emissions by 2020 and have claimed they will be ineffective. French daily Liberation pointed out that with transport contributing 37.7 million tonnes of carbon dioxide emissions annually, an eco-tax of 35 centimes per litre won’t be enough – especially since it won’t be introduced until 2010. “Not one of the measures announced last night by Lionel Jospin will create strong incentive for car manufacturers or drivers to tackle pollution,” an article in the paper’s 20 January edition stated.

Perhaps France’s ‘softly softly’ approach with regard to transport emissions is related to the Government’s overt confidence that it will meet its Kyoto commitments. Launching the national strategy, Jospin repeatedly alluded to the fact that France’s dependence on nuclear energy means that its greenhouse gas emissions are lower than the EU and OECD averages.

Other measures contained in the national climate change plan include:

• legal requirement to recover landfill sites’ methane emissions
• tightening of buildings’ energy efficiency standards
• closing the gap between the cost of diesel and petrol
• increasing levels of state support for renewable energy