France backtracks on fuel tax escalator

Environmental tax regime temporarily suspended in the face of damaging industrial unrest

Widespread and disruptive protests against high fuel prices by French hauliers, fishermen and other groups have forced the government to cut, suspend and even abolish a number of taxes, including an environmental tax "escalator" on diesel introduced in 1998.

The move highlights the increasing political pressure facing European governments trying to increase fossil fuel taxes for environmental reasons at a time when world oil prices have tripled over 20 months. Last year, similar protests forced the UK government to scrap its fuel tax escalator (ENDS Daily 9 November 1999). Germany's fuel tax escalator has faced similar opposition, though so far without forcing a change in policy (ENDS Daily 7 April).

The massive French protests began two weeks ago with fishermen blocking ports for days on end. Industrial action soon spread, with farmers and road hauliers taking up where the fishermen left off. This week's blockades of oil refineries by road hauliers led to fuel shortages in some areas. Motorists have queued at petrol stations and Nice's airport said yesterday that it was running low on jet fuel and might have to cancel domestic flights.

Under intense political pressure, the government last week abolished annual road tax for individual car owners in an outline tax plan for 2001-2003. It has also suspended a programmed annual rise in diesel tax for one year and offered further specific tax breaks and rebates for fishermen and road hauliers.

France's minority governing coalition partner the Greens yesterday attacked the concessions as anti-environmental. The party described the government's actions as "an unacceptable retreat" on the planned seven-year diesel tax escalator. The offer of extra tax rebates and an extra year's exemption from the diesel tax escalator to road hauliers "seems to renounce the policy of promoting the transition of road transport to rail," the party added.

However, a British environmental tax expert claimed that the French government's capitulation would not undermine longer-term moves towards higher fuel taxes. Chris Hewitt of the Institute for Public Policy Research said that the political pressures currently on governments due to high crude oil prices were a "temporary feature". Fuel taxes had been accepted across Europe and the environmental basis for increasing them was strong, he added.

Follow Up:
French finance ministry, tel: +33 1 40 04 04 04; tax plan for 2000-2003. See also information on the negotiations compiled by Le Monde;

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