A carbon tax had been proposed in 2010 by the previous conservative government of Nicolas Sarkozy, but it never became law. Sarkozy found it tough going with his conservative base to sell a new tax, and that may have doomed the proposal. But ultimately, and in contrast to how these debates have played out in the Anglo-Saxon world (to use a favourite French term) the failure of the proposed tax was a result of the opposition Socialists’ critique that the tax would be too low (it was proposed at 17€/t) and so ineffective in reducing GHG emissions. The Socialists challenged the law through France’s Constitutional Council (which exists to rule on the constitutionality of laws and regulations), which found that the many exceptions built into the proposal would be contrary to the French constitutional principle of “equality of taxation” (a principle(external link), it should be said, that does allow for differentiated treatment under a tax law, but only if such differentiation does not endanger achievement of the law), and that its level was insufficient to meeting the stated policy objectives.
That bit of history points to some interesting choices for the Socialists’ proposal. On the level of the tax, it is noteworthy that the Socialists had themselves proposed a carbon tax in the run up to the 2007 Presidential elections, at a price of 32€/t. Logically, their proposed levy would be priced in that range. If they found Sarkozy’s proposed 17€/t too low in 2010, it stands to reason the price will be above that at the very least. That is especially true if the Constitutional Court agreed with the Socialists in 2010 that a higher level was needed to achieve the law’s overall objectives.
On the matter of the tax’s incidence, the Minister is reported as having said that decisions on the tax would give due regard to the circumstances of various economic sectors, and that some might necessitate specific treatment. That sounds an awful lot like special treatment, which may again bring into question the equality of tax principle. At the very least, the government will have to prove that any exception provided in the new tax law will not interfere with its overall objectives. The art, one suspects, lies in how those objectives get defined.
From France’s experience, a few observations can be drawn. First, on the role of a carbon tax in a larger policy frame. The proposed levy will be developed as part of a larger fiscal reform agenda the Socialists are pursuing, and in the context of a national debate on energy transitions. Not only does that make it make easier to sell one instrument in a sea of others under consideration, it also reinforce the point that a carbon tax (or any consumption tax) is part and parcel of any serious tax reform agenda.
A second point would be about picking your battles. The Socialists’ challenge of the proposed tax in 2010 will, we can hope, give them a sense of what mistakes to avoid in their own legislation, and they may end up more successful as a result. But at the same time, the old “bird in the hand…” maxim applies. If your professed policy is to reduce GHG emissions, challenging a proposed tax because its level is too low is making the perfect the enemy of the good. We can hope that the law moves forward, and that it is stringent enough. But we shouldn’t forget that France could have had a carbon tax in 2010, and that would have been progress too.