The French tax system for the promotion of efficient cars

The French Grenelle de l’Environnement may not be as advanced as it should be, but one of its first part is already in place since January 1st. It is a huge success.

Since this date, if you buy a car in France you may be the subject of a price reduction or an additional tax on your car, depending on its carbon dioxide emissions, and thus its mileage.

This mechanism was created by the Ministry for Sustainable Development and Energy to promote the replacement of older cars by new efficient ones.

Here is how it works :

If you buy a small efficient vehicle you can receive up to 1,000 € in rebate, and if it is a gas guzzler, you will have to pay more (it can go to as much as 2,000€, or 3,100 USD).

Normally, the tax payed on large cars should fund the premium for the small cars. The operation is such a success and so many people are buying small efficient cars that the Government has lost 200 million euros in an operation that was supposed to be even.

To counter this, additional tax will be put on gaz guzzlers and SUVs. This kind of cars account for less than a percent of total sales of cars in France.

According to the Financial Times :

France is to slap an annual green tax on high-emission cars, such as sports utility vehicles, and extend punitive taxes to more environmentally damaging products in an attempt to revolutionise consumer behaviour and combat climate change.

Jean-Louis Borloo, ecology minister, said on Tuesday that the government’s carrot-and-stick “bonus-malus” tax system was proving successful and would be accelerated. The aim is to cut taxes further on environmentally friendly products while raising them on the most harmful products. “This will be a revolution. We must impose a fair ecological price,” he said in an interview with Le Parisien newspaper.

From the start of the year, the government has introduced bonuses for consumers who buy environmentally friendly vehicles and turn in cars more than 15 years old. These bonuses range from €200 ($316, £158) for cars that emit 121g to 130g of carbon dioxide per kilometre to €5,000 for electric cars.

But the government also penalises those who buy heavily polluting cars, charging as much as €2,600 for the largest SUVs. The new annual tax, which the government suggests could amount to about 10 per cent of the original charge, will apply to the most heavily polluting new cars sold from the beginning of next year. The government estimates it will affect about 1 per cent of French cars.

The governement is planning to extend this system to other products. I can’t wait !

In any case, be sure that I will keep you updated on that. So, for this and for much more, stay tuned !