Sarkozy faces down carbon tax opposition

French president Nicholas Sarkozy last week staked his political reputation on controversial plans to introduce a carbon tax, arguing that the unpopular proposals were essential to efforts to tackle climate change and establish France as "the world leader of non-carbon energies".

Speaking in a televised address from a heat pump factory in Culoz last week, Sarkozy attempted to face down critics of the new tax, drawing parallels between the introduction of the levy and other unpopular decisions that had later been proved to be of great historical significance such as President de Gaulle's decision to end colonial rule from 1958.

The new tax, which is to be introduced from next year, will charge individuals and businesses €17 (£15) per tonne of carbon they emit and will be levied on transport fuel and gas supplies. It is estimated to increase the price of gas by five per cent and lead to a four cent increase in the cost of a litre of petrol.

Polls have shown that around two thirds of voters are against the proposals, while business groups and rival political parties have also criticised the move arguing that it will impose additional costs on firms and disproportionately impact poorer people.

Green groups also criticised Sarkozy for failing to follow the recommendations of an independent committee that had recommended the levy be set at €32 a tonne, although the €17 a tonne tax is still higher than the €14 level that had been expected.

Sarkozy said the tax would help establish France as "the world leader of non-carbon energies, by developing renewable energy and drawing on its industrial know-how".

He added that certain businesses and poorer households would be exempt from the levy and also reiterated the government's commitment to ensure the tax is " revenue neutral" and offset by reductions in income tax and other levies.

His address also outlined new plans for a green car incentive scheme that will offer motorists payments of up to €5,000 for selecting green models.

The impact of the new tax is likely to be watched closely by other nations considering similar increases in green taxes.

Business groups have long argued that the unilateral introduction of carbon charging schemes will result in "carbon leakage", whereby carbon intensive firms seek to avoid such charges by relocating to countries without any form of levy on emissions, and other governments will be looking to see if this does indeed happen as a result of the French levy.

The tax is the latest in a series of moves apparently designed to wrest the unofficial title of world's greenest industrialised economy from its neighbour Germany. France already boasts relatively low emissions per head as a result of its widespread use of nuclear power, and over the past year Sarkozy has made the environment a central plank of his policy agenda.

He also appears to be preparing for a central role at the forthcoming UN climate change negotiations in Copenhagen, and in his speech he laid down a challenge to the US, Asia and other developing nations to follow Europe's lead in the adoption of wide-ranging climate change policies.