France Reverses Course and Nixes Carbon Tax Proposal

According to the French financial newspaper Les Echos, the government of François Hollande has scuttled plans to include a carbon tax in its fiscal year 2016 budget. The government’s sudden decision comes at a time when France’s energy portfolio faces several challenges.

The country’s aging nuclear power infrastructure, which the Financial Times estimates could cost the country at least 100 billion euros (US$108 billion), nudged Hollande to promise a reduction in nuclear plants’ contribution to the national power grid to 50 percent from the current 75 percent. In the wake of last year’s historic COP21 climate talks in Paris, Hollande’s environment minister Ségolène Royal promised that a carbon tax would help incentivize France to double its number of wind farms and triple the amount of electricity it generated from solar by 2023.

Supporters argued that a carbon tax could help transition France toward an energy infrastructure more reliant on renewables and less so on nuclear power. The emissions-free source of electricity has long been a source of French national pride, but in recent years it has become more controversial over environmental concerns.

The political reality, however, is that Hollande’s unpopularity -- which dogged him during most of his administration since he defeated Nicolas Sarkozy’s reelection bid in 2012 -- left him with little political capital to pass such legislation. Hollande’s disapproval ratings soared as high in 90 percent in one poll this summer as his reputation for indecisiveness, a stubbornly high unemployment rate and a spate of terrorist attacks demolished his standing with the French public. His promise to “commit unilaterally” to implement a carbon tax was generally ignored by voters and mocked by the press. Rumors of such a plan also led to an increase in electricity prices throughout France. Finally, warnings about a possible power shortage this winter also spooked many in the country’s parliament away from supporting the carbon tax proposal.

Furthermore, the level at which the French public would accept a carbon tax is at best lukewarm and at worst outright hostile. Sarkozy pushed for a revenue-neutral carbon tax during his presidency. But environmentalists insisted it did not go far enough, and French voters largely gave the proposal a massive thumbs-down. Although the tax was passed by the nation’s parliament in 2009, France’s highest court blocked the proposal later that year.

Had it been included in the national budget, France would have been the largest European economy to enact a carbon tax. Countries including Denmark, Finland and Switzerland have passed some form of a carbon tax. Around the world, British Columbia, Canada, imposed a revenue neutral carbon tax in 2008, and Costa Rica imposes a tax on carbon pollution.

This reversal of policy also comes at a time when yet another WikiLeaks email release revealed that Hillary Clinton considered proposing an ambitious carbon tax as central to her climate change agenda early on her presidential campaign. The proposal, to use financial penalties to discourage the consumption of fossil fuels, would have been a net financial gain for many poor and middle class American families, as the $42 per ton levy would have included taxes on gasoline and electricity but also provided billions of dollars disbursed as rebates.

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