Government body rejects Sarkozy's 'carbon tax'

REUTERS - France’s planned carbon tax cannot be applied because it includes too many exemptions, a French government body ensuring laws are constitutional ruled on Tuesday, in an embarrassing setback for the government.

The tax on carbon-emitting products, meant to encourage consumers to save energy and use less fossil fuels, is one of President Nicolas Sarkozy’s most loudly defended initiatives and was meant to come into effect on Jan. 1, 2010.

“The exemptions included in the carbon tax run counter to the aim of fighting climate change and create inequalities with respect to public charges,” the Constitutional Council said in a statement.

Prime Minister Francois Fillon said in a separate statement the cabinet would in January examine a new law taking into account the ruling.

Sarkozy has thrown his weight behind the levy, saying it would support the battle against climate change, but the plan had to be watered down extensively to appease critics.

In its ruling, the council said the law exempted some of the worst industrial polluters such as refineries and included relief for farmers and fishermen, among numerous other exemptions.

“93 percent of carbon dioxide emissions of industrial origin, other than fuel, will be totally exempt from the carbon tax,” the government body said in the ruling.

The tax has caused public upheaval in France, with critics within the ruling party saying the tax would hurt poor families and people in rural areas with little public transport.

The opposition Greens broadly agreed with the principle but said the tax should be higher, while the Socialists said it would deal a further blow to consumers already struggling to cope with the economic downturn.

As a result, the system that was eventually adopted would have differentiated between urban and rural dwellers, and applied to oil, gas and coal but not to electricity.

The levy, initially set at 17 euros ($25) per tonne of carbon dioxide emissions, would have translated into a rise in the price of fuel for cars, domestic heating and factories.