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Why France Is Mulling A Carbon Tax

Yesterday, I noted that Europe's cap-and-trade system seems to be faring pretty well at cutting CO2 emissions. As a partial counterpoint, though, check out Eloi Laurent's analysis of the ongoing carbon-tax debate in France. The story here is that the E.U. cap-and-trade system has driven down emissions from France's largest industrial facilities and power plants, but that only tackles about half the problem. So even though France is one of the least carbon-intensive countries in Europe and gets most of its electricity from nuclear power, it's still seeing a rise in emissions from cars, trucks, and smaller stationary sources. That's why Sarkozy is now proposing a modest carbon tax in addition to the ETS to help the country meet its climate goals.

But that's where the wrangling begins: Laurent points out that it's possible to refund the proceeds from a carbon tax in a way that would actually boost incomes for the bottom 60 percent of the country. But, apparently, Sarkozy is taking a different route, compensating households through income taxes in a way that will "hurt one of the last bits of progressivity remaining in the tax system." What's more, Sarkozy's proposed carbon tax is only about half as high as an expert commission on the subject had recommended. Not surprisingly, even carbon taxes aren't immune from politics.

(Flickr photo credit: Joelle Maslaton)