French carbon tax hotly debated

French Carbon Tax aims to cut CO2 emissions, curb climate change, and reduce fuel import dependence, pricing carbon at $20 per ton, rising to 2030, with revenue-neutral rebates, fuel levies, and energy efficiency incentives.

Paris is planning to introduce a carbon tax - a controversial move that could significantly boost energy efficiency behavior in France.

Championed by French President Nicolas Sarkozy, the carbon tax is part of Paris' plan to slash greenhouse gas emissions, combat climate change and become less dependent on fuel imports. To be placed on transport and household fuels, the tax is due to come into effect next year, with its exact scale under intense debate among policymakers.

Prime Minister Francois Fillon said in an interview with French weekly Figaro that Paris intends to set the initial price at $20 for a metric ton of carbon dioxide, as it rushes to revive the carbon tax in time for next year. That price will then gradually increase until 2030.

The French opposition has blasted the plan, saying big-time energy utilities should be taxed exclusively. Socialist leader Segolene Royal, who in 2007 ran against Sarkozy for president, said the tax would be unfair to low-income citizens dependent on driving their car, echoing controversies seen when Liberals championed a carbon tax in Canada. A $20 carbon tax would add $0.18 to the price tag of 1 gallon of unleaded fuel, based on French government estimates.

A poll by census company CSA found 74 percent of respondents oppose a carbon tax, with 56 percent of those very opposed. But environmental groups have lauded the plan, saying it has the potential to significantly alter energy efficiency behavior.

Paris has promised that the money collected from companies and private citizens, estimated to amount to $5.7 billion per year, would be handed back to taxpayers.

"I assure you there will be no increase in the obligatory taxes. The carbon tax is about transferring taxation, it is not a new tax," Fillon told Figaro.

The key question will be how to redistribute the money in a way that changes people's behavior but doesn't harm their overall spending power. Paris said it would help companies by lowering a business tax, with private citizens benefiting from lower income or social taxes.

The French government has faced a lot of opposition in connection with the tax, and at one point the prime minister signaled an end to the plan before adjustments. Its draft text had included a call for a levy of $45 per ton of CO2, more than double what Fillon said in the interview.

Critics say the tax could be seen as unfair in the current recession and might harm the government politically, a risk noted when the carbon tax plan was deemed risky for Dion by observers. But environmental groups have lauded the proposal as one that, unlike many others, is based on long-term considerations of how to benefit the climate.

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