The French government is working towards implementation of a direct carbon tax by July 2010. France’s Constitutional Council struck down the first version of the carbon tax bill last 29 December. On 21 January 2010, the government proposed a number of amendments to the original legislation, which is aimed at encouraging French consumers to be more energy efficient and conscious of their energy decisions.

The first version of the bill was meant to take effect on 1 January; halting its inception has been greatly embarrassing to Prime Minister, Nicolas Sarkozy. The legislation was deemed unconstitutional due to a large number of sectoral exceptions. The new version of the bill will maintain the originally proposed 17 EUR per tonne of carbon dioxide with compensation for households. There has been a reduction in the number of exemptions. Though, certain “sensitive and energy-intensive sectors” will still receive special exemptions. Farming and fisheries will pay just one-quarter of the normal rate; road transport and shipping, will only pay 65 percent.

French Environment Minister, Jean-Louis Borloo, has begun a series of consultations with companies, trade unions, and environmental non-governmental organizations concerning the specifics of the legislation. “The goal is to develop a new draft, which will be sent to Parliament for approval by spring,” spokesman Luc Chatel told a press conference after the weekly cabinet meeting.

Under the new proposal, the tax level remains at 17 EUR per metric tonne of CO2 at over 1,000 of the most polluting sites. The main innovation of the amended bill is the inclusion of previously excluded sectors, such as power stations, oil refineries, and cement works. These plants were exempted in the first version of the bill because they are scheduled to be subject to a European Union quota system to be implemented in 2013. EU regulation calls for emissions in those sectors to be reduced by 21% by 2020.

In late January, a poll released by ViaVoice showed 51 % of the French public thought the government should abandon the tax proposal. “The carbon tax should not be an umpteenth tax used for filling up the state coffers,” small business union CGPME said in a statement. The French government is addressing this concern. It continues to stress that for businesses of all sizes, combined with the reform of local business taxes, the carbon tax will merely serve to transfer taxation away from work and investment. Yet, the debate continues to focus on how to compensate low income households,; due to inefficiency, the tend to use relatively more fuel and many work at night before public transport is running.

“The best would be for it to be ready in 2010 but it’s true that all these details … are complicated,” Michel Rocard, a former Socialist prime minister, said in an appearance on Europe 1 radio. “I don’t know if we will be ready in 2010.”

Last July, Rocard headed a review report of the potential tax for the government. At that time, the burden of the tax was presented as being divided roughly equally between households and businesses. There is no clear indication of how this division will change under the most recent tax proposal.

After a first round of consultations, the French government has unveiled two options for introducing the tax system into industrial sectors already subject to the European emissions quota system.

The first option would levy the carbon tax on all industries, but the introduction would be at reduced rates for companies most exposed to international competition, as well as for those that are the largest consumers of energy. A series of quantitative criteria (yet to be fully unveiled) will be used in order determine the particular rate of tax.

Additionally, under this plan, companies would be entitled to receive a tax credit on investments aimed to reduce both energy consumption and emissions and to prevent industrial risks.

The second option for the tax would construct a bonus-penalty system. All industrial installations would be subject to the tax of of 17 EUR per tonne of carbon dioxide emitted. Under this second plan, each business would receive a lump sum tax credit, dependant upon its efforts made to reduce emissions.

“This is the beginning of a wider process of reflection and consultation,” Economy Minister Christine Lagarde said after the report was presented.

While most politicians agree emissions must be cut to fight global warming, a key part of the debate is on how to compensate poorer households, workers in certain sectors and those who need to drive because they work at night or live in rural areas.

France aims for an 80% reduction in CO2 emissions by 2050.

France would be the largest economy to apply a direct carbon tax, mirroring existent measures in Denmark, Sweden, and Finland.

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