French government details energy tax proposals with lower-than-expected revenues

The proposals will come into effect from the 1 January 2001, the French Finance Ministry announced, resulting in an annual saving of 2.4 million tonnes of carbon emissions by 2010 and 3.8 billion francs (US$500 million) towards employer’s labour taxes, which is half the amount originally estimated.

The new ‘eco-tax’ is the result of a 1999 consultation paper inviting industry’s opinion. Only businesses that consume more than the equivalent of 100 tonnes of oil equivalent (TOE) will have to pay the new tax, meaning that only 40,000 of a total 2.8 million businesses in France will be liable. Agriculture and associated industries, and haulage firms are the sole ones exempt from the tax, apart from the energy producers themselves. Fossil fuels will be taxed on their particular carbon intensity, based on a fixed rate of 260 francs (US$35) per tonne, so, for example, coal will be taxed at 174 francs (US$23) per tonne and electricity at 1.3 centimes (US$0.002) per kilowatts per hour.

However, energy intensive companies which sign up to voluntary agreements with the government to cut their carbon dioxide emissions over five years will get reductions in their tax, depending on firms’ TOE use. Those consuming 50-100 TOE per one million francs (US$133,000) of added value will be eligible for a 50% discount, which will rise to 80% for firms in the range 100-200 TOE, 90% for those consuming 200-400 TOE, and 95% above this level. Moreover, these companies will eventually be able to participate in emissions trading.

Left-leaning daily Libération criticised the ‘eco-tax’ for only raising half the revenues originally planned, unnecessarily exempting certain sectors of industry from the tax and referred to the plan for emissions trading as a “permit to pollute”. The newspaper says that it is a paradox that the steel company Usinor, one of the 100 biggest polluters in France, will be exempt from 95% of its tax through the voluntary CO2 reduction scheme.