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Carbon in the French style

France is getting ready to impose a $25-per-ton carbon tax on heating oil, gasoline, and natural gas. President Nicolas Sarkozy claims that the new fee is really a tax shift — the money will be rebated to citizens or used to reduce other taxes — although critics have called it a tax hike in disguise.

France is in an interesting position. As a Kyoto signatory, the country is required to meet certain emissions reduction targets. But Kyoto only applies to large stationary sources, such as power plants and industrial facilities. 90% of France’s electricity comes from carbon-free nuclear power plants, so a large proportion of France’s emissions are outside Kyoto’s reach. The new tax would address this situation by extending a carbon-pricing scheme to cars, homes, and businesses.

The scheme has been attacked from all sides. Some criticize it as a tax hike dressed up in green rhetoric. They are especially annoyed that proceeds from the tax increase won’t go toward renewable energy development. Even if true, this criticism makes little sense. Governments have to raise money from somewhere, and they may as well do it by taxing things with negative externalities, like fossil fuel use, rather than things with positive externalities, like income. Whether France should be investing more heavily in renewable energy is a separate question that need not be linked to this particular proposal.

The carbon tax has been attacked from the left as an unfair burden on consumers. France’s Socialist Party has instead proposed new taxes on oil companies. This might be a more politically palatable source of funds, but it will do little good from an environmental perspective. Only if the price of dirty energy rises will people find a reason to use less of it.

Finally, environmentalists have complained that the tax doesn’t go far enough. The French branch of Greenpeace has said that it’s better to do nothing at all than to impose a tax too low to affect consumer behavior. On its face, this is somewhat absurd — $25 per ton certainly qualifies as substantially better than nothing — but Greenpeace is angry that Sarkozy has ignored a report from his own government calling for a carbon tax almost twice as high.

Relatedly, France has repeatedly argued for tariffs on products from countries who fail to control their greenhouse gas emissions. Recently Germany joined this call. Meanwhile, Japan’s new government has given climate talks a shot in the arm by pledging a 25% cut in emissions, the most aggressive near-term goal of any country. How long before the entire world is under a unified carbon pricing scheme?

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