Green France
Posted by fazeer on 20 August, 2008
The innovative “bonus-malus” scheme introduced in France in Jan. 2008, where purchases of new, high carbon-emitting cars are taxed (between €200 – €2600) while purchases of new, low carbon-emitting cars are subsidised (between €200 – €5000), is having a great success. Sales of small cars (those emitting less than 130 CO2 per km) have gone up by 45% and CO2 emission by new cars have been reduced by 9%, more than the reduction planned for 2012-2020! The cost of the success: what was planned as a revenue-neutral scheme is costing €140 million to the tax payer in 2008, as the number of subsidised cars sold far outpaces the number of taxed ones. Does the environment have a price? No, says the French Environment Minister, Mr Borloo, who wants to extend green taxes and subsidies to a host of household items (television sets, computers, tyres, light bulbs, etc). Finance Minister, Mr Woerth, on the other hand, seems to be more concerned about the fiscal costs of the operation: France wants to balance its books by 2012. The question, of course, is whether the 9% reduction in CO2 emission is really worth an annual €140 million – i.e. €2.50 per capita. Also, can a similar reduction be achieved at a lower cost, say if the measures were less generous? It’s all about price elasticities of demand.
