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France's strategy in the fight against climate change

France’s strategy in the fight against climate change

Published on September 15, 2009
Speech by Nicolas Sarkozy, President of the Republic, (excerpts)

Artemare, September 10, 2009

Our world has reached a moment of truth. Admittedly, the global economic crisis we’re going through isn’t yet over. But today we must decide if we want to create a different world from the one we knew pre-crisis, a more sustainable, more environmentally friendly and fairer world. (…)

Without corrective action on our part, the current warming threatens to accelerate: by between 1.8º and 4º by 2100, with a risk of sea levels rising a further 18-59cm. It’s time to act.

I’m absolutely convinced that it’s at these times of great difficulty that we need to take the decisions to map out the future. A new world has to be born out of this unprecedented economic crisis. (…)

GRENELLE ENVIRONMENT FORUM

Since my election, I have wanted our country always to be out in front in the effort to take up what I know to be ineluctable environmental challenges. The Grenelle Environment Forum, which I proposed and Jean-Louis Borloo has been spearheading for two years, symbolizes and is delivering on France’s effort to be in the vanguard for sustainable growth.

Besides taking important measures on biodiversity, sustainable agriculture and waste recycling, the Grenelle Environment Forum was designed to be a vast plan for preparing our country for the post-oil, energy-efficient economy and increasing the use of renewable energies. Over €4 billion of public and private money will be invested by 2020. Over 600,000 new jobs are expected. I’m convinced we will create even more.

With the Grenelle Environment Forum, France has given herself the goal of cutting energy consumption in buildings and homes by nearly 40% by 2020. A big drop in energy consumption means everyone immediately gets extra money to spend. (…) We have decided to help our fellow citizens install solar heating systems, heat pumps and wood-fired heating systems. And we have created a zero-interest loan to finance insulation, available to everyone, up to a ceiling of €30,000 over 10 years. In barely three months, nearly 25,000 zero-interest eco loans have already been taken out. This year, we will exceed our initial objective of providing €1.2 billion for new works to improve the energy efficiency of homes.

With the Grenelle Environment Forum, France has set herself the goal of becoming the world leader for zero or near-zero emission energy production by developing renewable energies and drawing on French industry’s nuclear power know-how. In the coming years, we are going to devote as much money to research into renewable energies as to nuclear power: €200 million more, every year, to give our country a technological advance in the key sectors of energy storage, marine energies, second-generation biofuels and solar energy. There’s nothing coincidental about the recent announcement of the establishment in France of a world leader in solar panels.

INFRASTRUCTURE BUILDING/EU/COPENHAGEN SUMMIT

Finally, with the Grenelle Environment Forum and the economic stimulus plan, France has launched a unique programme for building sustainable infrastructures. For the first time since the Second World War, a canal will be built in France linking the Seine with Northern France and Europe. Work on four high-speed rail links is just about to start. By 2020, Paris and the regions will be getting nearly 2,000 km of new dedicated lanes for public transport vehicles [such as buses and trams] which the State is going to support. Everywhere, for people and goods, the aim is to create viable and regular alternatives to road transport.

After investing in the infrastructures, we’re also going to invest massively in rail freight. We have to open up new lorry-rail schemes, create, at last, the means of carrying freight at high speed, bringing railway services into our major ports, guaranteeing priority track access for freight trains.

Driven by these commitments, France promoted the Grenelle ambition throughout her European Union presidency. There was the negotiation of the "climate energy package": the most tremendous plan ever adopted for cutting CO2 emissions. As a result of this decision, Europe has become the greatest laboratory for inventing tomorrow’s "green" technologies. It’s because we were the first to set ourselves unparalleled objectives that European technologies will tomorrow be the most advanced.

Next December, in Copenhagen, the conclusion of a global agreement on the climate will be at stake. Between then and now, France intends going on relentlessly pressing all the world’s nations to commit proactively to cutting their carbon dioxide emissions. Our message is simple: we, Europeans, have taken on board the consequences of our responsibility for climate change. We have pledged to cut our emissions by 20% between 2005 and 2020 and are ready to go further, up to 30% if every member faces up to its responsibilities. At the same time we are asking the rest of the world to move in the same direction. The rest of the world means Asia, the United States and also the emerging countries.

ENVIRONMENTAL TAX/CARBON TAX

Confronted with the climate emergency, the threats presented by our dependency on oil and need to transform our growth model, it’s time France radically adapted her system of tax incentives and created a genuine environmental tax system. (…)

Last spring, I committed to do this: a new environmental tax, the carbon tax will be created: in 2010 it will be levied on oil, gas and coal, depending on the level of their carbon dioxide, the main gas responsible for climate change. This new tax will have only one goal: to encourage households and companies progressively to modify their behaviour and cut consumption of fossil energies which emit CO2. This tax will stimulate energy savings, reduce the oil and gas bills of both the country and families and create an incentive to step up development of green technologies.

Here let me point out that there will be no carbon tax on electricity. Electricity production in France emits very little CO2 thanks to our nuclear, hydro-electric and biomass power plants and also, increasingly, thanks to the new renewable energies. In Europe we are the country with the most renewable energies. How coherent would it be on one side to encourage the French to run electric cars and fit solar panels, and, on the other, tax them more for doing so? (…)

To continue cutting our emissions, set France on the post-oil path, it’s become essential to change our behaviour. And today this is achievable: for nearly two years now, the car bonus-malus scheme (1) has shown how even a limited financial incentive could make a big difference to our fellow citizens’ consumer choices: at the end of 2007 barely 15% of cars sold were clean cars. At the end of August 2009, 54% of sales were of cars below the 130gm CO2/km threshold. Conversely, the proportion of big CO2 emitters in total car sales dropped from 30% to 10% between the end of 2007 and last month. So the French are ready to commit to the essential change in their energy consumption provided they receive clear signals and are offered a fair contract. I want to commit myself here to the major principles which will govern the introduction of the carbon tax.

CARBON TAX/PROGRESSIVE INTRODUCTION

First principle: the carbon tax will be introduced progressively. (…)

In the market where emissions quotas are traded between major companies, the value of a tonne of CO2 has, since its creation in February 2009, been around €17. (…) So I have decided that the starting point for this new tax would be set by reference to the value of the CO2 emission quotas on the carbon market. I intend the introduction of the carbon tax to be a success for our country. This is why I tell all the most ardent defenders of the carbon tax that this measure’s success would be endangered were we to ask our fellow citizens to adapt to too brutal a change in energy prices. €17 per tonne of CO2 will already be a significant effort: nearly 4.5 euro-cents per litre of heating oil, 4 euro-cents per litre of petrol and about 0.4 euro-cents per kWh of gas. (…)

So let me make it quite clear that the level of the carbon tax will rise gradually over time. Here too, I shall not evade my responsibilities. We will just need to find the right rate at which to increase it. In any case, I want to make it clear: however much the carbon tax rises in the future, whatever increases there are in environmental taxation, the compensation the French receive will also have to increase, and do so commensurately.

SAME TOTAL TAX TAKE/GREEN CHEQUE

Second principle which I deem especially important: creating the carbon tax won’t increase the total tax take in our country. This for me is an absolutely sacrosanct rule. It means that the creation of the carbon tax is going to be accompanied by a simultaneous and equivalent drop in or disappearance of other taxes. The aim of the environmental tax isn’t to fill the State coffers, but to encourage the French and the companies to change their behaviour. So – and I make a very firm pledge here – the creation of the carbon tax won’t reduce the purchasing power of the French or penalize our companies’ competiveness.

More specifically, I want, for French households, the creation of the carbon tax to be accompanied either by a reduction in income tax for all households subject to it, or receipt of a "green cheque" for an equivalent sum for all households who aren’t. (…)

So the product, not far short of €3 billion, of the tax will be refunded to household through an income tax rebate or a green cheque. Of course, every family will pay the carbon tax on their energy consumption, which will encourage them to reduce it. This is the polluter-pays principle. But cutting consumption will be that much easier since every family will be compensated by a cheque or fixed reduction in tax so that the carbon tax doesn’t eat into their purchasing power. So at the end of the day, those deciding to reduce their energy consumption will be double winners: they will pay less carbon tax but will receive under the offsetting scheme the same sum as if they hadn’t economized. This is how, thanks to a bonus-malus mechanism, we’re going to give the French the means to change their behaviour in order to cut energy consumption and CO2 emissions. The malus is the carbon tax. For families, the bonus is the green cheque, or income tax rebate for the same amount.

As regards companies, when the carbon tax comes in 2010, they will benefit from the removal of the proportion of the taxe professionnelle [business tax based on capital and turnover] impacting on investment. Through this ambitious reform, our companies will be compensated for the cost of the carbon tax and, simultaneously, at last be able to invest without being fiscally penalized. (…)

BORDER CARBON TAX

(However,) we won’t combat climate change more effectively if the carbon tax ends up benefiting agricultural and fishery imports or disadvantaging French transport firms compared with competitors with less exigent environmental standards.

This is why, when I had the honour of being president of the European Council, I got the adoption of the possibility of bringing in a carbon tax on our borders. It would be intolerable if, just when we’re striving to produce and consume green products, we get imports from firms which have a competitive advantage because they aren’t complying with international commitments to reduce carbon tax emissions. Everyone would then lose out: the climate and jobs in our countries. I note that a few weeks ago the United States House of Representatives passed a bill also proposing a border carbon tax. I note too that the World Trade Organization has deemed such a mechanism perfectly compatible with its rules. This is a battle I’m going to lead. A carbon tax at the border is the natural complement to a domestic carbon tax. Far more importantly: a carbon tax at the borders is vital for our industries and jobs. It demands first of all the creation of the carbon tax in France. Our battle against pollution and climate change mustn’t be fought to the detriment of our industries.

TRANSPARENCY

Third principle: transparency! I want an independent commission to guarantee total transparency on offsetting the carbon tax. As you will have understood, I want clear rules for compensating households and companies for the carbon tax. So I propose the creation of a permanent independent commission to monitor French environmental taxation. (…)

GRENELLE INCENTIVES/TRANSPORT

Fourth principle: the State will continue providing a great deal of support for households’ efforts to cut their energy consumption and move towards renewable energies. All the incentives developed in the framework of the Grenelle Environment Forum will be maintained and prolonged. (…)

In the crucial transport sphere, thanks to technological advances the next few months will see the arrival of rechargeable electric or hybrid vehicles on the market. On 23 September Jean-Louis Borloo will present the electric and hybrid vehicles plan I announced at the last Motor Show. This will mean, in 16 months’ time, car manufacturers will be able to offer all the French the possibility of buying an electrical or hybrid vehicle at an acceptable price by benefiting from the super bonus of €5,000 (for vehicles with an emission level of below 60g CO2/km).

CARBON TAX/ECONOMIC GROWTH

Ladies and gentlemen, the creation of a carbon tax is anything but an insignificant decision. It is a carefully thought-out strategic choice and major fiscal change as well as an economic decision of primordial importance. (…)

By bringing in an environmental tax on fossil energies, we’re going to get the ball rolling in the whole area of green growth. Because the carbon tax is going to encourage our fellow citizens to "go green", it will offer new massive and promising outlets for all our manufacturers capable of producing "green products". With the carbon tax and Grenelle Environment Forum measures, the State is going to create the conditions for a huge increase in the size of our country’s "green market". France will be the first country of this size to go this far. The aim, for all our manufacturers, is not to miss this opportunity. (...)

You see, ladies and gentlemen, the same applies to environmental taxation as to many other things: there are those who talk and those who do. For me, it’s basically a question of responsibility. Responsibility towards our children and the generations to come, since this measure will help create a better world for them. Responsibility towards the French of today. I gave them my word two and a half years ago by signing the ecological pact proposed by Nicolas Hulot (2), which had the creation of a carbon tax as its second objective, behind establishing a huge sustainable development ministry, the one Jean-Louis Borloo heads today.

The situation is too serious for us to fool ourselves or pretend. All my life I’ve wanted to restore the reputation of politics. To put it plainly, restoring the reputation of politics means believing that nothing is ever inevitable. Believing that there’s no problem, however big, that a nation like ours can’t resolutely tackle if it decides to, be it raising the moral standards of global capitalism or fighting climate change. Restoring the reputation of politics means believing that what political leaders say has to remain meaningful. And in no way is it inevitable that the passage of time, difficulties of the moment or prevailing demagoguery will overcome the finest ideas, the most essential commitments or be victorious in the most noble battles. (…)./.

(1) A financial reward (bonus) for purchasers of environmentally-friendly new cars and a financial penalty (malus) for those buying cars emitting high levels of CO2. The aim of the scheme is to speed up the removal from French roads of old polluting vehicles and their replacement by new green ones and encourage vehicle manufacturers to develop ever greener vehicles and concentrate their sales efforts on these

(2) All the presidential candidates were asked to sign an environmental pact, committing them to several green objectives.

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