Case Note: How To End an Attempt to Institute a Carbon Tax: The Conseil Constitutionnel Declares That Article 7 Of The 2010 Budget Instituting a Carbon Tax Does Not Conform to The Constitution of The French Republic

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Keywords: Carbon tax, non-conformity with the Constitution, French Fifth Republic Constitution, Charter for the Environment.

THE GENESIS OF THE CARBON TAX

The Crenelle de l'environnement'* was conducted between 24 and 26 October 2007. It was a vast collaborative consultation between private and public bodies, at both central and local government level. This consultation was organised around four 'round tables' conducted by five groups from different origins (local government, State/central government, NGOs, employers and employees). It enabled the highlighting of major axis of actions grouped around specific themes. Following the consultation negotiations took place, which were supervised directly by the President of the Republic, Nicolas Sarkozy, and the Ecology Minister, Jean-Louis Borlo. One of the actions recommended by the outcome of the Grenelle was the introduction of a carbon tax. It quickly became evident to the partners involved in the discussions of the Grenelle de Venvironnement that it was important to study the feasibility of such a tax, which was branded a taxe or contribution climat-energie (CCE). President Sarkozy considered in his speech in 2007, ending the Grenelle and presenting its results, that a carbon tax should be one of its priority outcomes.2 However, this idea disappeared completely during 2008. At the time it was said that the delay was because of sharp increases in energy prices that occurred during that period. There were,in fact, two further reasons: (1) economic - the economic crisis had just started, and (2) political - the necessity to discourage any attempt to create more taxes.

During 2009 the idea of a carbon tax reappeared on the presidential agenda. It was brought back to life by the drop in energy prices, making it more 'feasible', and also by the large success of the green parties at the European elections, in France and across Europe. The re-launch was carried out in the most formal way the President could wish for - that of an address to MPs. This had recently been allowed by a 2008 modification to the Constitution. In accordance with Article 18 (modified), the President of the Republic now has the right to address the two chambers of the French Parliament meeting in a form similar to the Congres, at the Palace of Versailles. Therefore, on 22 June 2009, the President addressed the Congres and announced that he wanted to progress the carbon tax as far as possible, declaring at the same time that 'the more we could tax pollution, the more we would decrease charges on labour'. Following this address, the CCE project was incorporated into the 2010 Budget project, which was discussed during autumn 2009. Both chambers of the French Parliament adopted it on 18 December 2009 as part of the State Budget legislation.3

In the Bill, three articles relating to the CCE were introduced in 2010 Budget project: Articles 7, 9 and 10. Article 7 created a carbon tax on miscellaneous products sold, used or to be used as fuel. Article 9 created a tax credit in favour of natural persons. The idea was to retrocede the tax they would have paid and the VAT corresponding to the tax. Finally, Article 10 proposed that the tax on the consumption of domestic fuel, on the use of heavy fuel and on miscellaneous products used by farmers would be refunded to the extent of three-quarters of the CCE. These articles transposed the President's intention into text. However, if Article 7 was meant to design the tax, the other two articles created several exemptions from it. For instance, Article 7 stated that for each type of fossil energy designated, the tariff of the CCE would be 17 euros per tonne of carbon dioxide produced. But Article 10 instituted several exemptions, reductions, partial refunds and specific rates. This was primarily designed to exempt from the CCE emissions from thermal power plants producing electricity, emissions from the 1,018 industrial sites considered to be the most polluting, (such as refineries, cement works, coke plants and glass-making factories), emissions from chemical industries using intensive energy, and emissions from air transport and passenger public transport. There were also proposed reduced tax rates for emissions from farming, fisheries, the road transport of goods and maritime transport.

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