France's solution to global warming? Tax citizens on the CO2 they produce

The heavily taxed French like to grouse about all the levies they pay, but there's a new tax that's turned that constant grumble into a roar. Called la taxe carbone, or the carbon tax, the new levy would charge businesses and individuals €17 for every ton of carbon dioxide (CO2) they produce. It's the equivalent of asking Americans to cough up $25.30 for every ton of CO2 they generate -- about 20 tons per year for every U.S. citizen, or three times as much as the average Frenchman.

France's measure is being closely followed around the world as it would be the first to penalize private citizens -- not just corporations -- for their carbon-fueled lifestyles. The French government hopes that as a result of the tax, more people will reduce consumption by taking public transportation to work instead of their cars, or by wearing sweaters, say, instead of cranking up the heat.

"It is time to create an environmentally based tax system," French President Nicolas Sarkozy (pictured) said in a recent press conference. "France should support taxes that discourage polluting while reducing by the same amount taxes on production and employment." The law is supposed to take effect in 2010, with the carbon tax increasing over time. And that's not sitting well with many voters, who elected the center-right Sarko, as he's called, partly on his pledge to keep taxes under control. A recent poll conducted for the national radio station Europe 1 finds two-thirds of the country's citizens oppose the tax, suggesting a showdown ahead.

Even France's former Minister of Ecology, Alain Juppé, is skeptical, according to a recent interview in the leftist daily Libération. "They told us that it wouldn't really be a tax, but we would like to see concrete proof," he said. The tax would be assessed on coal, oil and natural gas. Because France derives nearly 80 percent of its electricity from nuclear energy, electricity would be exempt from the new levy.

Here's how it would work: A liter of diesel (which is used in many cars in France) would cost, for example, an additional 4.5 euro cents (6.7 cents), or about $3.42 dollars more to fill a normal tank, according to France's Ministry of the Economy. It's at home, however, where the French would really take a hit, with the tax expected to add €45 ($66.91) for 1,000 liters of heating oil and €60 ($89.21) to the annual cost of natural gas consumption, the ministry said.

But things get tricky. The €4.3 billion ($6.39 billion) raised annually by the tax would actually be returned to taxpayers in the form of tax reductions or "green checks." A family living in an urban area, for instance, would get a break of €112 ($166.53) on their income taxes. A family living in the country, which presumably would mean higher carbon taxes because of the lack of public transportation, would get an even bigger reduction of €142 ($211.14). Businesses that are not already part of the European Union's carbon-reduction program would see similar decreases. "The goal of the carbon tax is not to fill the government's coffers," Sarkozy said. "Every cent collected from households will be returned to households."

Sarkozy wants to make the point that pollution -- and cleaning it up -- costs money. By taxing polluting fuels -- and decreasing income taxes -- the idea is, quite basically, to reward work and punish carbon waste. The ultimate goal is to reduce France's contribution to global warming.

But the increasing complexity of the tax -- every week a new wrinkle is introduced -- has left many French scratching their heads. "To be honest, I really don't understand it," says Jean-Louis Bernardon, an insurance executive from the Paris suburb of Le Vésinet. "What is the point of having a tax that could be canceled out by a credit?" But the 56-year-old, who says he bikes to the train station to go to work instead of taking his car, says he supports the idea of taxing fossil fuels. "I think it makes sense to force people to understand there's a cost connected to pollution."

Camille Gras, a silversmith (yes, it's a real profession in France) who frequently drives to work, is blunt about the expected impact of the tax on gas prices, "That would suck," says the 26-year-old Parisian. But he grudgingly admits it has potential benefits. "I may take the subway more or ride my bike," he says. "It's going to force me to change my lifestyle, which I guess is the point."

In some ways, it could have been worse for consumers. Earlier plans called for the tax to amount to €32 ($47.58) per ton of CO2, considered by experts to be the actual cost of carbon dioxide pollution. But given the state of France's economy, which is no better off in many respects than America's, Sarkozy, who has worked hard to fashion himself into an environmentally minded leader, decided to nearly halve the rate.

It's unclear to what extent the tax will force the French to curb their use of fossil fuels. For his part, Gras says "the only way to motivate someone is money." For a Frenchman, that's a decidedly American way of thinking. But he may just be right.

Increase your money and finance knowledge from home

How to Buy a Car

How to get the best deal and buy a car with confidence.

View Course »

Advice for Recent College Grads

Prepare yourself for the "real world".

View Course »

Add a Comment

*0 / 3000 Character Maximum