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France adopts 2014 budget; carbon tax on fossil fuels

France's Parliament definitively adopted Thursday the Socialist government's budget for 2014 which introduces from January a carbon tax on the use of gas, heating oil and coal, Parliamentary documents show.

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Key priorities in the budget are reducing the public deficit to 3.6% of GDP in 2014 and prioritising the government's planned "energy transition" to support renewable energy and energy efficiency projects while reducing the role of nuclear power.

In a deciding vote Thursday in the lower house, L'Assemblee Nationale, the bill was agreed after support from Socialist, Green and other left-of-center parties. Members of the main centre-right opposition party, UMP, voted against.

The bill introduces a carbon tax on household use of gas, heating oil and coal in 2014, according to carbon content. The tax is to be implemented for transport fuels such as gasoline and diesel from 2015 onwards.

President Francois Hollande announced in September a target of reducing fossil fuel consumption by 30% by 2030, in a bid to reduce final energy consumption by 50% by 2050.

The duty will be charged at a rate of Eur7/mt of carbon in 2014, rising to Eur14.50/mt in 2015 and Eur22/mt in 2016.

As well as gas, heating oil is used commonly in French homes, and the government expects the scheme to generate Eur340 million in 2014, jumping to Eur2.5 billion in 2015 and Eur4 billion in 2016.

Industrial companies which are part of the EU's carbon Emissions Trading Scheme, as well as transport and fishing sectors, are to be exempted from the carbon tax.

Budget documents show that the government intends to channel the full Eur340 million received from the tax in 2014 into its energy transition plans, hoping to boost employment in the green sector.

Some Eur2.2 billion of the carbon tax revenues in 2015 will go towards the energy transition, with a further Eur1.5 billion in 2016.

The budget also includes a gradual phasing out of certain tax exemptions for biofuels between 2014 and 2016, through which the government hopes to save Eur85 million in 2014.

The budget measures factor in pledges written into the constitution in June 2013, which stipulate that the impact on natural resources and pollution are included as a cornerstone of fiscal policy.

But in October the government postponed the introduction of an "eco-tax" on heavy goods vehicles using French roads, after violent protests against the measure in the north-west region of Brittany where food and agriculture industries rely heavily on road transport.

The eco-tax scheme was initially approved by Parliament in 2007 but last week, Prime Minister Jean-Marc Ayraut said it would only be implemented if there was a "consensus" in favour, implying input from a range of social and business organisations.

The government had hoped to raise Eur1 billion/year from the eco-tax scheme from 2014 onwards.

Other energy-related measures in the 2014 budget include widening of subsidised gas and power tariffs for the fuel-poor from 1 million households to 4 million at a cost of Eur400 million next year.

Under the government's plan to accelerate household renovations to improve energy efficiency, the budget includes a reduction in the tax on work carried out to insulate homes, which is expected to cost the state Eur500 million.

--Robin Sayles,
--Edited by Jeremy Lovell,