French Prime Minister
Edouard Philippe said Dec. 4 that fuel tax hikes would be suspended in
response to nationwide anger that he said has “deep roots.”
The single most effective weapon in the fight
against climate change is the tax code — imposing costs on those who
emit greenhouse gases, economists say. But as French President Emmanuel
Macron learned over the past three weeks, implementing such taxes can be
politically explosive.
On Tuesday, France delayed
for six months a plan to raise already steep taxes on diesel fuel by 24
cents a gallon and gasoline by about 12 cents a gallon. Macron argued
that the taxes were needed to curb climate change by weaning motorists
off petroleum products, but violent demonstrations in the streets of Paris and other French cities forced him to backtrack — at least for now.
“No
tax is worth putting in danger the unity of the nation,” said Prime
Minister Édouard Philippe, who was trotted out to announce the
concession.
It
was a setback for the French president, who has been trying to carry
the torch of climate action in the wake of the Paris accords of December
2015. “When we talk about the actions of the nation in response to the
challenges of climate change, we have to say that we have done little,”
he said last week.
Macron is hardly alone in his
frustration. Leaders in the United States, Canada, Australia and
elsewhere have found their carbon pricing efforts running into fierce
opposition. But the French reversal was particularly disheartening for
climate-policy experts, because it came just as delegates from around
the world were gathering in Katowice, Poland, for a major conference
designed to advance climate measures.
“Like everywhere else, the question in France is how to find a way of combining ecology and equality,” said Bruno Cautrès, a researcher at the Paris Institute of Political Studies. “Citizens mostly see punitive public policies when it comes to the environment: taxes, more taxes and more taxes after that. No one has the solution, and we can only see the disaster that’s just occurred in France on this question.”
“Like everywhere else, the question in France is how to find a way of combining ecology and equality,” said Bruno Cautrès, a researcher at the Paris Institute of Political Studies. “Citizens mostly see punitive public policies when it comes to the environment: taxes, more taxes and more taxes after that. No one has the solution, and we can only see the disaster that’s just occurred in France on this question.”
 |
| Yellow-vested demonstrators block a fuel depot Tuesday in Le Mans, France. (David Vincent/AP) |
“Higher taxes on energy have always been a hard
sell, politically,” said N. Gregory Mankiw, an economics professor at
Harvard University and advocate of carbon taxes. “The members of the
American Economic Association are convinced of their virtue. But the
median citizen is not.”
In
the United States — where energy-related taxes are among the lowest in
the developed world — politicians, their constituents and their donors
have repeatedly made that clear.
President Bill
Clinton proposed a tax on the heat content of fuels as part of his
first budget in 1993. Known as the BTU tax, for British thermal unit, it
would have raised $70 billion over five years while increasing gasoline
prices no more than 7.5 cents a gallon.
But
Clinton was forced to retreat in the face of a rebellion in his own
party. “I’m not going to vote for a BTU tax in committee or on the
floor, ever, anywhere. Period. Exclamation point,” said then-Sen. David
L. Boren (D-Okla.).
The state of Washington has also tried — and failed twice — to win support for a carbon tax or carbon “fee.” In 2016, the state’s voters rejected a ballot initiative that
would have balanced a carbon tax with other tax cuts. In 2018, a wider
coalition sought backing for an initiative that would have poured fee
revenue into clean energy projects, job retraining and early retirement
plans for affected workers. The fee would have started at $15 a ton and
gone up $2 a ton for 10 years. It, too, failed.
 |
| A worker removes graffiti reading "Macron resignation" from the Arc de Triomphe following protests in Paris. (Thibault Camus/AP) |
To be sure, some climate-conscious countries have adopted carbon taxes, including
Chile, Spain, Ukraine, Ireland and nations in Scandinavia. Others have
adopted cap-and-trade programs that effectively put prices on carbon
emissions.
Only around 12 percent of global
emissions are covered by pricing programs such as taxes on the carbon
content of fossil fuels or permit trading programs that put a price on
emissions, according to the International Monetary Fund.
Policy experts say that to some extent the prospects of carbon taxes may depend on what happens to the money raised.
Policy experts say that to some extent the prospects of carbon taxes may depend on what happens to the money raised.
Using the revenue for deficit reduction, as was planned in France, is a no-no.
“Even
in the best of times, carbon taxes must be carefully crafted to avoid
political pitfalls,” said Paul Bledsoe, a former Senate Finance
Committee staffer and Clinton White House climate adviser. “In
particular, much of the revenue raised must be recycled back to
middle-income workers. Macron’s approach put the money toward deficit
reduction, stoking already simmering class grievances.”
Last
year, a group of economists and policy experts — including former
treasury secretaries James A. Baker III and Lawrence H. Summers and
former secretary of state George P. Shultz — advocated a
tax-and-dividend approach. It would feature a carbon tax of $40 a ton,
affecting coal, oil and natural gas. The revenue would be used to pay
dividends to households. Progressive tax rates would mean more money for
lower- and middle-income earners.
“Because
the revenue is rebated equally to everyone, most people will get more
back than they pay in carbon taxes,” said Mankiw, who is part of the
group. “So if people understood the plan, and believed it would be
carried out as written, it should be politically popular.”
So far the group, called the Climate Leadership Council, has not been able to generate much support from members of Congress.
But Canada is about to offer a test case.
Prime
Minister Justin Trudeau has unveiled a “backstop” carbon tax of $20 a
ton, to take effect in January, for the four Canadian provinces that do
not already have one.
Trudeau was elected
partly on a promise of this sort of measure, but it’s costing him more
political capital than expected. Conservative premiers oppose the plan,
which looks set to become an election issue.
Trudeau’s
policy, however, is designed to withstand criticism. About 90 percent
of the revenue from the backstop tax will be paid back to Canadians in
the form of annual “climate action incentive” payments. Because of the
progressive tax rates, about 70 percent of Canadians will get back more
than they paid. If they choose to be more energy efficient, they could
save even more money.
The first checks will arrive shortly before Canadian elections.
Climate policy doesn’t only suffer from lack of enthusiasm. It also arouses the ire of right-wing populist movements.
Many
of the people most angry at Macron’s tax come from right-wing rural
areas. The German right-wing opposition party Alternative for Germany
has called climate change a hoax. And in Brazil, a new populist
president had indicated he will develop, not preserve, the Amazon
forests that pull CO2 out of the air and pump out oxygen.
President
Trump, who has said he does not believe climate science, also took to
Twitter to say Macron’s setback showed Trump was right to spurn the Paris climate agreement.
“I
am glad that my friend @EmmanuelMacron and the protestors in Paris have
agreed with the conclusion I reached two years ago. The Paris Agreement
is fatally flawed because it raises the price of energy for responsible
countries while whitewashing some of the worst polluters in the world,”
he wrote. “American taxpayers — and American workers — shouldn’t pay to
clean up others countries’ pollution.”
Fuel
taxes, however, generate revenue that stays inside home countries
without going to pay for others’ pollution. And the Paris agreement
placed much greater responsibilities on developing countries than ever
before.
A member of Trump’s beachhead
transition team at the Energy Department also took to Twitter to
celebrate the collapse of Macron’s fuel tax plan.
“It’s
easy for politicians like #Macron to lecture us about #ClimateChange
because the elites don’t notice the economic hit. Working class people
do. Working class French people are ANGRY about unnecessarily higher
fuel taxes that are only a #virtuesignal,” wrote Thomas J. Pyle,
president of the Institute for Energy Research — a group funded in the
past by Koch Industries, the American Petroleum Institute and Exxon
Mobil.
Jason Bordoff, director of the Columbia
University Center on Global Energy Policy, said the celebration “would
be reading too much into what’s happening in France.” That’s because
Macron was already seen as favoring the rich over the working class, he
said.
Nicolas Hulot, a popular climate change
activist and Macron’s former environment minister, made national
headlines in August when he resigned from Macron’s cabinet
during a live radio broadcast. His reason: that the French government
was more word than deed when it came to fighting climate change.
On
the heels of the French government’s abrupt reversal on fuel taxes
Tuesday, Hulot praised what he couched as a necessary political
maneuver, albeit one that was not good for the environment.
“I
welcome a necessary, inescapable, courageous and common sense decision
in the current context, which saddens everyone,” he said, speaking on
France’s RTL radio. But, he added, there would probably be consequences
from the popular uprisings against the diesel taxes, which the
government has now suspended for six months.
“All that is not good news for the climate,” he said.
The
key, said Hulot, is not to impose action on climate change in a
technocratic way, in a way that ordinary people do not understand. “The
ecological challenge shouldn’t be against the French,” he said. “We need
every Frenchwoman and Frenchman. On that, there is obviously a huge
amount of misperceptions and misunderstandings.”
