II-10.2 : The French Conseil Constitutionnel (Constitutional Council) publishes a December 29th, 2009 decision (n° 2009-599 DC) on the 2010 Finance Act.

The Government has been debating the idea of a carbon tax to penalize carbon dioxide emitters and to make them aware of the cost of their emissions. After the adoption of the Grenelle I Act, a conference of experts presided by former Prime Minister Michel Rocard met in July 2009 in order to think of a way to orient taxation in such a manner as to send price signals capable of orienting energy consumers’ behaviours. The 2010 Finance Act therefore contained a scheme called the Carbon Tax, which was supposed to come into force on January 1, 2010.

Preliminary bills of the Act clearly reveal that the goal of the carbon tax is to implement instruments allowing for significant reductions in of greenhouse gas emission in order to fight global warming, by creating an additional tax on fossil fuels, which would encourage businesses, households, and government administrations to reduce their emissions. The Act created a tax of 17 Euros per tonne of carbon dioxide emitted, compounded by a complex income tax credit scheme in order to refund them a fixed amount of the tax they paid, as well as total exemptions from the tax for the majority of the most polluting industries (power plants, refineries, cement works, coking works, glassworks, the chemical and airline industries, and passenger transport by road), as well as partial exemptions for agriculture, fishing, and merchandise transport by road and by sea.

In its January 29, 2009 decision, the Conseil constitutionnel sanctioned this scheme. After reaffirming that the Charte de l’environnement (Environmental Charter) is considered to be part of the Constitution, especially its 2^nd and 3^rd articles on the principle of prevention, and its 4^th article on the principle of repairing damage to the environment, the Conseil explains that the constitutionality of the scheme implemented by the law must be interpreted according to its conformity with the objective of reducing carbon emissions. The Conseil also remarks that tax breaks or special tax rates can only be justified when they are in the general interest, or when their beneficiaries are specifically taxed by a separate scheme. Yet, the complex scheme implemented by the law means that 93% of carbon dioxide emissions produced by industry would be completely exonerated from the carbon tax, and that activities subject to the tax would represent less than half of all greenhouse gas emissions. Truly, the scheme would essentially tax only heating products and automobile fuels, which are only one of the many sources of carbon dioxide emissions. The decision concludes that the size of the tax exemptions make this law contrary to the objective of the fight against global warming and create a blatant inequality before the law (section 82). Consequently, the Conseil declared this scheme unconstitutional.