France to raise pollution tax on SUVs and trucks to $22,240

Source: By Ania Nussbaum, Bloomberg • Posted: Monday, January 6, 2020

 France is taking aim at SUVs by raising a tax on heavier and more polluting vehicles, a measure that comes on top of tough new European rules being phased in next year to lower car emissions.

Under a law adopted by parliament this week, cars emitting carbon dioxide above a certain threshold will be subject to a €20,000 ($22,240) penalty in 2020, higher than the existing €12,500. At the same time, the government is considering reducing cash incentives for the purchase of electric cars.

The measures show policymakers are still finding their way on how best to back a shift to cleaner cars. Sport utility vehicles are among the most polluting because they are heavier and less fuel efficient.

Yet they made up 30% of sales in France in the first 11 months of the year, according to Paris-based consultancy Inovev. While sales of electric cars are growing quickly, they still make up a tiny proportion of the overall market.

France’s SUV levy comes as the European car industry prepares for the phasing in next year of emissions rules that will see carmakers fined if their total annual vehicle sales exceed an average carbon limit.

The French finance ministry has estimated its SUV penalty could yield €50 million a year in revenue for the government, which will be used to help carmakers shift to cleaner cars.

Finance Minister Bruno Le Maire has also criticized SUV advertisements, saying they should warn consumers of the detrimental effects of the cars on the environment.

At the same time, France is also seeking to reduce subsidies for electric and hydrogen cars in the years to come on the assumption that prices will drop.

In 2020, the central government will give as much as €6,000 toward the purchase of an electric car costing less than €45,000. The handout is set to drop in 2021 and 2022, the environment ministry has said.

The SUV and electric-car measures have come under fire from the French industry.

“It’s a double penalty for consumers,” Luc Chatel, head of French lobby group PFA, said in a statement, which called the policy “incoherent.”

“The electric-car market won’t take off without strong purchasing incentives,” he said. “Everyone has something to lose: The industry, the environment and the purchasing power of the French.”

Subsidies to consumers toward buying electric vehicles can be costly. France’s bonuses reached €550 million last year, according to the French auditor. Germany has also put in place similar incentives, which BloombergNEF estimates could cost as much as €2.6 billion by 2025.