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France's carbon tax ... a step forward? step to the side?

by a siegel Wed Sep 2nd, 2009 at 05:07:11 PM EST

The news in France:  a 14 Euro (tax per ton of carbon to go into effect in 2010. While discussion of a carbon tax has been an item of debate within French society, Prime Minister Fillon's announcement of the actual amount and the parameters of the coming have created what might be an explosive discussion.

In short, the parameters:


       
  • Tax on carbon sources, including oil (gasoline, diesel), natural gas, and coal.

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  • Electricity is not included (considering that France is almost entirely 'carbon light' (nuclear 80+%, hydro, and some (growing) wind/solar), this is not surprising)

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  • This is a revenue-neutral program, with reductions in other taxes to balance this revenue source.

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  • Many details yet to be worked out/announced, such as how to deal with helping those less fortunate deal with the additional costs.

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  • This is the first step of a tax that will be gradually increased and spread throughout the economy to help achieve French goals for a 75+% reduction in CO2 emissions by 2050.


On first glance, writ large, this looks to be a positive move, the type of revenue source rebalancing that should be pursued around the globe to help drive moves toward a low-carbon future.

Even so, while "positive", this is causing debate with criticism coming from all directions.


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As to criticism, there are those who are arguing (strenuously) that this is far too weak.


       
  • The formal recommendation, from earlier this summer, called for a 32 Euro per CO2 ton tax -- thus this tax is less than half that recommended.

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  • There are those questioning the exclusion of electricity (especially 'anti-nuclear' campaigners, but also those seeking an overall reduction in energy use, even amid a prioritization of reductions of fossil fuel pollution).


Sadly, some of the earliest and loudest criticism is what looks to be political opportunism from Socialist Segolene Royal, who ran against Sarkozy for President.
Spotting a chance to score political points, [Sarkozy's] former presidential rival Segolene Royal savaged the proposed Climate-Energy Contribution as "unjust" and "inefficient" at the Socialists' annual congress at the weekend.

She argues a flat levy on fuel would hit low-income families disproportionately hard -- especially those in out-of-town areas who have no choice but to use cars -- without helping to develop clean alternatives.

Royal said the government would do better to "tax oil and energy companies based on the profits they make from fossil fuels" and invest in electric cars.


Sigh -- a politician who didn't miss a chance to have political opportunism triumph over sensible policy making and necessary moves to a prosperous, climate-friendly future. Putting it politely, "France Nature Environment [stated that] Royal's attacks risked turning voters against the idea of green taxation."  (Royal's arguments sound eerily familiar to those who scream bloody murder in the United States when the words 'gas tax' are mentioned, whether the price of gasoline is 99 cents or $4.49 per gallon.) They serve to undermine an ability to shift the nation toward a more sensible fiscal policy and a more sustainable energy policy by playing to base emotions rather than educating and leading.

To provide a perspective, the 14 E tax would raise French gasoline prices by about 0.03 Euros per liter which is just about a 2.5% increase on the cost of gasoline. It is hard to see that 2.5% driving down driving in any significant way ... but this is just the beginning imposition of a tax that will gradually grow which, along with items like the FeeBate based on pollution levels of new cars and growing electrification of transport (including increasing kilometers of trams), will help drive people toward lower carbon options.

All of the discussions, to date, in France have included variety of paths to assist those lower on the economic scale and those in situations requiring assistance to lower their carbon burden. The details have yet to be announced ... and details matter. There is a real challenge of how to apply a tax and provide fiscal balancing while also driving changed behavior toward a lower polluting profile.

It looks like Royal's heavy criticism has had an interesting counter-reaction. Criticism from within Sarkozy's own UMP (the right wing party) has silenced.

PS:  I haven't had time to absorb the debate or robustly analyze the proposal.  Didn't see anyone else here discussing this.

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European Tribune - France's carbon tax ... a step forward? step to the side?
She argues a flat levy on fuel would hit low-income families disproportionately hard -- especially those in out-of-town areas who have no choice but to use cars -- without helping to develop clean alternatives.

Where have I heard this plaintive cry before?  Oh yes, last summer, when gasoline price rose so fast and high.  And at the time, I was very sympathetic to those complaints about how the less well-off and more car & truck dependent were suffering.

But amazingly, despite the initial furor, people somehow adjusted.  At least, so it seemed, as the furor appeared to go down before gas prices did.  (Or did the media just get sick of covering all the whining?)

Too bad gasoline prices did not remain so high.  Or rather, too bad the U.S. government at the time did not impose a gradually increasing gasoline tax (like Fillon's proposal) to take advantage of what adjustments people had already made to the higher prices.

But hey, if Royal's and Aubry's political opportunism is making the UMP close ranks to pass what seems to be a very good piece of legislation, tant pis.  Kudos to Fillon and the UMP for introducing it.

The West won the world not by the superiority of its ideas or values or religion, but rather by its superiority in applying organized violence.

by marco on Thu Sep 3rd, 2009 at 02:22:55 AM EST
By the way, not sure that "very good" is descriptor even while "good" looks to be relevant/appropriate.

Blogging regularly at Get Energy Smart. NOW!!!
by a siegel (siegeadATgmailIGNORETHISdotPLEASEcom) on Thu Sep 3rd, 2009 at 12:19:35 PM EST
[ Parent ]
This is a revenue-neutral program, with reductions in other taxes to balance this revenue source.

How can one evaluate Royal's response without having details of this. If the "other taxes" are income taxes on the lower brackets, she is just engaging in demagoguery. If, on the other hand, they plan to lower the taxes on capital gains, she may have a point.

by gk (gk (gk quattro due due sette @gmail.com)) on Thu Sep 3rd, 2009 at 02:59:04 AM EST
Couple things.

  1.  There is, essentially, no way that an "excess profits" or equivalent tax would have the same impact re the "eco" side of things.

  2.  From what I've seen / heard, we're talking about Royal giving this a broadside and attacking this approach strong for awhile. There is a difference between saying "we should be highly concerned about making sure that this approach will not devastate people while helping us reduce pollution" and trying to score political points without regard to the real impact of the policy. Again, I don't have full details and am being open about it -- but her reaction/play seems to be second rather than first.


Blogging regularly at Get Energy Smart. NOW!!!
by a siegel (siegeadATgmailIGNORETHISdotPLEASEcom) on Thu Sep 3rd, 2009 at 12:18:53 PM EST
[ Parent ]
I'm pretty sure that you're right about Royal, but I'm also very suspicious of Sarkozy. Even at the current level of detail, he could have given some idea who would benefit from the proposed tax cuts.
by gk (gk (gk quattro due due sette @gmail.com)) on Thu Sep 3rd, 2009 at 01:59:03 PM EST
[ Parent ]
Yeah. Seems like I've seen this movie before.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 3rd, 2009 at 03:59:02 PM EST
[ Parent ]
Here's two links.  I think Jerome might be right as well, though. It might be a disingenuous policy engagement strategy (to use the lobbying lingo) to change the policy agenda item to a decision about a "tax" instead of "trade" knowing that there is more opposition in the US to anything with the word "tax" in it.
by santiago on Fri Sep 4th, 2009 at 10:38:32 AM EST
[ Parent ]
in the US debate over climate change legislation, rather than a cap and trade approach.  That should tell us something about what Royal is worried about. The reason is that a tax on all carbon sources, rather than a regulated limit on total carbon emissions, allows much, if not most, of the burden of of restricting GHGs to be placed on consumers rather than on producers of GHG-laced energy sources.  Consumers must make lifestyle sacrifices while producers remain highly profitable.  The elasticities of demand and supply for energy allow production of GHG fuels to be greater and more profitable under a tax regime than under a cap regime.  That's likely where Royal is coming from, and that's why most economists on the left favor a cap system in the US rather than a tax system.

The EU, however, which already has a cap system, has been constrained by lack of infrastructure to measure emissions so cap regulation has proved difficult to implement there.  Rather than spend additional euros on increasing the environmental regulatory bureaucracy for information gathering, a tax allows a second-rate political solution. Taxes, however, place no limit on carbon emissions, and if the elasticity of demand for carbon energy is great enough, emissions can even increase under a tax regime, depending upon other developments in the economy.

by santiago on Thu Sep 3rd, 2009 at 05:38:42 PM EST
[ Parent ]
santiago: The oil industry supports carbon taxes in the US debate over climate change legislation, rather than a cap and trade approach.

Could you provide any references for that?  (I always thought that the oil industry favored cap-and-trade as an easier system to "game".)

The West won the world not by the superiority of its ideas or values or religion, but rather by its superiority in applying organized violence.

by marco on Fri Sep 4th, 2009 at 04:43:50 AM EST
[ Parent ]
I think the industry has also supported a carbon tax recently as a way to create confusion in the debate aned weaken the push for cap-and-trade, by putting on the table (again) a beguiling alternative and making some supporters of cap-and-trade waver and ask for new studies...

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Sep 4th, 2009 at 08:16:08 AM EST
[ Parent ]
Oops, I responded here accidentally.
by santiago on Fri Sep 4th, 2009 at 12:50:03 PM EST
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If the reduction in taxes goes to income coming from jobs in the lwoer income brackets I am all for it.

Actually, I will change my ideas about Sarkozy being all talk , no substance.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Thu Sep 3rd, 2009 at 07:36:16 AM EST
Sarkozy has now let it known that nothing had been decided...

And the left is now unfiied in fighting this as a regressive, unjust tax measure - yet another one.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Sep 4th, 2009 at 08:17:18 AM EST
"Left is united ..."

Even as details of the tax are unclear? Wouldn't it be better to lay out the parameters, clearly, that would make this acceptable rather than stand in opposition to something that will help (at least some) in the move toward a lower carbon future?

Blogging regularly at Get Energy Smart. NOW!!!

by a siegel (siegeadATgmailIGNORETHISdotPLEASEcom) on Tue Sep 8th, 2009 at 02:49:19 PM EST
[ Parent ]


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