France goes for a carbon tax? Peut-etre

A diverse bunch of economists, commentators, free-marketers and even Exxon’s chief think that a carbon tax is better than a cap-and-trade scheme. The argument mostly goes that it is simpler, cheaper to administer, and by providing more certainty over the price of carbon, it gives businesses a stronger incentive to invest in low-emission technologies and infrastructure.

The problem is, the idea of a whole new tax is basically a political ‘third rail’ – and talking about externalities won’t very likely reverse that. But France is planning to introduce a carbon tax anyway. Well, perhaps.

Prime minister Francois Fillon reportedly told Le Figaro that the tax would be introduced at €14 per tonne, which would equate to €0.33 €0.033 per litre of petrol, or between €25 and €75 per year for household heating costs. Fillon insisted it was not a new tax as such, because all the resulting revenue would be handed back to taxpayers in some form.

It’s not exactly smooth sailing – a government panel wanted the initial price to be €32, rising to €100 in 2030.

And there might be more backpedalling on the way. Reuters reports that a poll published in France todayo found 74 per cent of respondents opposed the tax. Furthermore, the president was not quite so certain as Mr Fillon:

However, an official quoted President Nicolas Sarkozy as saying a final decision had not yet been made, undercutting his prime minister. Sarkozy met ministers to discuss the issue on
Friday but no details of their discussions emerged.

Related links:

Another view on cap-and-trade giveaways (FT Energy Source, 28/05/09)
France’s complicated relationship with efficiency (FT Energy Source, 22/07/09)
Cap-and-trade versus everything else (FT Energy Source, 12/06/09)

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