Row over fuel prices highlights flaws of France’s ecological tax

Close up of fuel nozzles at a gas station in Cannes, France, 26 October 2018. According to reports, recently diesel fuel has become more expensive than unleaded gas. [EPA-EFE/SEBASTIEN NOGIER]

The many exceptions to the  French carbon tax do not make it easier for people – and drivers – to accept green taxation, EURACTIV France reports.

On 6 November, President Emmanuel Macron defended the Contribution Climat Énergie (CCE), a French version of the carbon tax, whose steady increase in recent years has brought about a growing dispute over rising fuel prices.

The French far-right has called for a demonstration against this green tax on 17 November. They could be joined by a section of the far-left and the traditional right, in a move that threatens to crystallise opposition to the government.

The far-right is set to win the European elections in France, according to recent polls.

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Adopted in 2013, the Contribution Climat Énergie has increased from year to year, putting pressure on fuel prices. In 2019, a tonne of CO2 will cost €55 in France, which is reflected by around an additional 10 cents per litre of petrol or diesel.

The tax was decided behind closed doors years ago, when oil prices were still low. This means the CCE is little-known among French people, many of whom have only recently discovered it at a time when many are already feeling disgruntled with this year’s tax rises.

However, it is the increase in the price of oil that has added to the carbon tax’s impact. The price of petrol in France is already the highest in Europe.

A tax excessively paid by individuals and not enough by business

The €55 cost of a tonne of CO2 in France compares with the European price of €17 per tonne and does not perform the same services. The French Contribution Climat Énergie affects both private individuals and businesses, generating almost €7 billion a year through the prices of all fuels, including fuel oil, gas, petroleum, diesel and coal.

However, many industrial sectors have been exempted, including agriculture, all of the industry sectors subject to emissions allowances, road transport and air and maritime transport.

Moreover, these tax inequalities are a problem, according to ecological tax experts. The tax disproportionately hits those on the lowest incomes, who receive an ‘energy cheque’ of €150 if they do not pay any tax.

The French government has promised to increase this amount for 2019. Macron also mentioned a “kilometric allowance for French people who have to drive” in an interview on Europe 1 on 6 November.

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The most polluting industries pay less

The French ecological tax hits private individuals harder than businesses due to the many exceptions. The industries emitting the most CO2 were therefore the first to have to reduce their emissions by joining the European CO2 market in 2005.

Having long paid a price of less than €10 per tonne, they now have to pay €17 in order to emit one tonne of CO2, three times less than what is paid by private individuals.

Nevertheless, this system has the advantage of already being in place, accepted and having the capacity to fluctuate over time. For example, if there is high demand, the price of a tonne of CO2 could increase.

The recent price increase has also led to a rise in revenue. Having produced €221 million in 2013, carbon allowance auctions should generate over €800 million in 2018. In France, the outcome of these auctions is allocated to supporting thermal renovation of housing up to a limit of €550 million.

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For ecological experts, the exemptions are particularly problematic for sectors which are not subject to any carbon tax, such as transport, small energy-intensive facilities, agriculture and fish farming.

“The removal of these exemptions is necessary, on the one hand, to ensure consistency between public spending and French objectives, and on the other hand to maintain the price signal,” stated the Institute for Climate Economics (I4CE) think-tank in a memo.

The memo also clarified that removing these exemptions would bring in twice as much money for the French state, around €14 billion.

The objective of covering all of the greenhouse gas emissions in the long term is in the report recently prepared by French MP Bénédicte Peyrol and Dominique Bureau. The report advocates accelerating “the extension of the ecological tax while working on recycling its product by expanding the scope of the ‘energy cheque’ beneficiaries and a significant increase in its amount.”

There are few carbon taxes elsewhere in Europe. Sweden established one 20 years ago which now totals €120 per tonne of CO2 emitted. In the United Kingdom, a carbon price floor was implemented with the price of €20.41 per tonne.

This is the type of price floor which France is calling for, notably, to limit the carbon burden gap between industry and private individuals.

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