Wednesday, December 30, 2009

Sacre Bleu! French Carbon Tax is Unconstitutional

Interesting news out of France today:
France's Constitutional Council, the nation's highest constitutional authority, struck down a new tax on carbon emissions, dealing a blow to President Nicolas Sarkozy, who has made fighting climate change a key part of his tenure.

France's Constitutional Council ruled the proposed tax, due to become effective on Friday, allowed for too many exemptions even though it, in theory, introduced a 17 euro tax per every ton of carbon emitted. The court said the tax would not have applied to 93% of industrial emissions.

All the exemptions, the court ruled late Tuesday, created "a breach of the principle of tax equality," according to a copy of the ruling posted on the council's website.

Sarkozy had pledged tougher environmental legislation in his 2007 election campaign and had made climate change a key part of his victory speech after the election.

Sarkozy had strongly championed the tax, which would have been the first tax of such heft introduced in France in the past 20 years and which was forecast to generate a total of 4.1 billion euros for the government....

In introducing the 17 euro tax, the law passed by the French parliament exonerated a range of high-emitting commercial users, including power stations, oil refineries and cement works.
The government had introduced the incentives because it was worried that a carbon tax might hurt French industry by raising its costs.

The law also lightened the tax imposed on groups such as truck drivers and fishermen, who have in the past blockaded ports and roads to protest government measures.

To limit the impact of the French carbon tax on domestic industry, Sarkozy had been hoping to extend a version of it to the whole of the European Union. That would have given the EU the option of taxing imports from countries with looser emission controls so as not to hurt the bloc's industry.

The French tax would have fallen mainly on consumers' use of gasoline and heating fuel, and would have entailed an increase in the price of car fuel of about 4 euro cents per liter in 2010.

Farmers and fishermen were scheduled to pay the tax at a quarter of the full rate, while the state planned to reimburse 35% of the amount paid by truck drivers.

The ruling provides a rare boost for the opposition Socialist Party, or PS, which lodged the appeal that led to the council's ruling....

The government is scheduled to present a revised version of the bill to parliament by Jan. 20. Hamon said the PS would push for all forms of energy consumption to be taxed.

Without the carbon tax, a source of government revenue had been removed at a time when tax receipts are being dented by the economic downturn. The country's budget deficit is forecast to reach 8.2% of gross domestic product this year and 8.6% in 2010.
Well, I don't know about you, but I for one am just shocked (shocked!) that a massive government regulation was tainted by strong lobbying from, and huge carve-outs for, domestic interest groups. Whoever would have though that climate change regulations were so susceptible to such a dastardly thing? Ummmm...

But seriously, as you'll recall, France has been one of the loudest proponents of carbon tariffs - border measures on imports of carbon-intensive products from countries (mostly developing ones) that don't employ sufficiently strict climate change regulations. And as the article makes clear, the unconstitutional French law contemplated such tariffs and was hoped by Sarkozy and others to be a model for an EU-wide carbon tax/tariff system. So this is certainly a big blow to the eco-protectionists out there.

That said, I wouldn't count on the bad guys to just give up in 2010. Indeed, I'm rather convinced that the failure of Copenhagen will result in even louder calls for eco-protectionism in the US, the EU and elsewhere.  Only next time - which looks to be only a few weeks away on January 20, 2010 - they'll probably ensure that it's "constitutional."

(At least by the standards of the Socialist Party.)


RickRussellTX said...

They didn't explicitly state whether it comes under the 421 provision, but this seems to indicate:

that a consortium of steel concerns, including the union, are responsible for requesting the tariff on steel drilling pipe.

Scott said...

No, that's a good, ol' fashioned, AD/CVD case, and as I've discussed, there's little discretion - especially by the politicos in the White House - under that part of US trade law.

But yes, you're right, the same repeat players are involved in all of these types of "administrative protectionism."