France Revamps Dreaded Carbon Tax

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Exhuming the idea of the dreaded carbon tax, French Ecology Minister Philippe Martin has announced plans recently to introduce a new "climate energy contribution" in France, within the framework of the Government's 2014 finance bill.

Determined to reassure households, already "fed up" with taxes, French Prime Minister Jean-Marc Ayrault has stepped in, however, insisting that this will not mean the creation of a new tax. The level of taxes in France will not be affected by the introduction of the contribution, Ayrault made clear.

Although the Government has not finalized details of its plans, the new climate energy contribution is expected to be based on a proposal put forward at the beginning of the summer by economist Christian de Perthuis, Chairman of the French committee on ecological taxation (CFE). In its June report, the CFE suggested that a carbon tax be introduced within the framework of the domestic tax on consumption (TIC), thereby enlarging the base of an existing tax, while at the same time taking into consideration the carbon footprint or content of the different types of energy.

France's TIC tax includes, for example, the domestic tax on the consumption of energy products (TICPE), the domestic tax on natural gas (TICGN), and the domestic tax levied on the consumption of combustibles, including coal, lignite, and coke (TICC).

The CFE recommended that the tax be introduced progressively, rising from a starting point of EUR7 (USD9.3) per tonne of carbon in 2014 to EUR20 per tonne in 2020. The measure would directly impact on fuel prices at the pump.

The Government is expected to put forward a raft of additional environmental tax initiatives in its September finance bill. It must find EUR3.5bn by 2016, via so-called "green" tax measures, to finance the competitiveness and employment tax credit (CICE). The Government intends to abolish certain tax breaks deemed to be anti-environmental. It is examining the idea of progressively aligning the taxation of diesel and petrol and of imposing a tax on refrigerants, used in fridges and air conditioning systems.