European Union to Coordinate Carbon Tax, Infrastructure Investment

In advance of next month’s European Parliament election, several sources at the major mainstream parties have said that there are plans to coordinate a carbon tax, paired with investment in green infrastructure. Representatives of the European People’s Party (EPP), the Socialists and Democrats group (S&D), the Alliance of Liberals and Democrats for Europe (ALDE), and the Greens-European Free Alliance group (G/EFA) have agreed on an outline, to be passed after the election. The unaffiliated La Republique En Marche, which is expected to be the largest party in France in the coming election, is in on the agreement as well, and has been a key driver of the deal under the leadership of President Emmanuel Macron. As the four parties as well as LREM are expected to have a large majority of the seats among them, the deal should not have difficulties passing.

At heart is an attempt to unify different national approaches to climate change. One source specifies that after frustration with the slow pace of decarbonization in France, in large part due to the Gilets Jaunes’ street riots against higher fuel taxes, Macron sought a Europe-wide approach. While the left in France was skeptical, green and social-democratic parties in the rest of Europe were supportive. Italy’s Democratic Party (S&D) was especially interested, citing worries that France’s lower fuel taxes were causing motorists in western Liguria to drive over the border to fill up in the nearby French Riviera. The Social Democrats in Sweden, under the leadership of Prime Minister Stefan Löfven, have been supportive as well, and several sources agree that they played a role in persuading the entire S&D group to support a strong carbon tax law.

Obtaining the consent of EPP was more difficult due to its skepticism over tax increases. There is no first-hand on-the-record reporting for how this was achieved, but a large number of second-hand sources agree that Chancellor Angela Merkel agreed in order to appeal to German Green Party voters, as the party is rising in the polls in the European as well as German elections and has popular state-level leadership.

The deal will impose a minimum carbon tax starting at 50 per metric ton of CO2-equivalent in 2020, rising gradually to €200 per ton in 2035. The tax will include border adjustments for the carbon content of imported goods, a clause that is said to have come at the insistence of union-affiliated S&D leaders who worried about competition from outside the EU. Controversially, the language of the draft deal permits individual member states to give industries credit toward exports.

The tax will be collected entirely at the member state level, like existing taxes on fuel and tobacco and VAT, where the EU mandates minimum floors (such as 15% for VAT) and monitors compliance but does not collect the taxes itself or redistribute the proceeds. Sweden’s existing carbon tax, currently 120 per ton, will therefore stay where it is. The EU will ensure member states collect the tax and do not give undue exceptions to industrial users; only exports and fuel for extra-EU flights and shipping may be exempted from the tax.

Simultaneously, the parties agreed to accelerate spending on EU-wide green infrastructure. As with the tax, member states will have considerable latitude, in order to mollify concerns among some Greens that the EU will stealthily mandate the construction of new nuclear power plants, as well as concerns among most EPP and ALDE parties that government spending would rise too much. Germany, in particular, has plans to reduce taxes on businesses: the Merkel cabinet has had to resist the business community’s demands for tax cuts, arguing that it is in growth times like this year that is is most tempting to engage in fiscal profligacy. There will also be additional spending on urban rail, motivated by the projected mode shift away from cars as a result of the new tax, but people close to the key decisionmakers say that massive federal spending in Germany is unlikely.

In France, the plan is to use the proceeds to invest in transportation alternatives, including a roster of new urban rail lines in Paris as well as most secondary cities. Macron is said to be in favor of accelerating the construction of new TGV lines connecting the entire country to Paris within at most 4 hours, as well as orbital lines connecting provincial cities to one another.

The timing of the leak is unusual. One source speculated that it is timed for the eve of Brexit, to nudge Britain to revoke Article 50 and stay in the EU to avoid finding itself fighting another EU bureaucracy if it left without a deal. While the spokespeople for the British Conservative Party who were contacted for this story oppose the climate agreement, the agreement can pass the European Parliament even over the party’s objections.

Nonetheless, euroskeptical forces have used the leak as an opportunity to portray the EU in conspiratorial terms, particularly ones affiliated with the far-right Europe of Freedom and Direct Democracy (EFDD) and Europe of Nations and Freedom (ENF) groups. The Italian Lega (ENF), expected to emerge as the single largest national party after the election, attacked the EU for dictating to member states. France’s National Rally (ENF), the party of the Le Pen family, said that Macron is immiserating France, that carbon emissions are caused by corporate shipping and not by driving, and that Europe would not have any environmental problems if it did not have population growth due to immigration. The UK Independence Party (EFDD) added that it’s not even clear if climate change is real, and said that this is why it always backed Brexit.

Nonetheless, the polls are stable enough that all observers expect ENF and EFDD, and even the UK Conservatives’ European Conservatives and Reformists (ECR) group, to lack the power to defeat or even weaken the proposed legislation. In response to threats by the Gilets Jaunes to call a massive nationwide rally next Saturday, the leader of the opposition Republicans (EPP) threatened that perhaps France should declare martial law to forestall riots.

Both Macron and Löfven have since taken political ownership of the agreement, calling it an example of pan-European cooperation to solve global problems. After the agreement leaked, Macron touted the plan as a way forward for France as Europe’s leader in high-speed rail, and promised that French industry would manufacture the trains, wind turbines, and solar cells while combating the country’s Western Europe-leading air pollution levels at the same time. He referenced the slogan from the 1970s’ oil crisis leading to the construction of the TGV and nuclear plants: “in France we have ideas.”

In Sweden, sources close to the Löfven cabinet point out that the country’s long-time moral leadership is paying off, as there is an extensive clean industry in Sweden, including rolling stock as well as engineering professional services. A spokesperson for the Swedish Greens added that this was also an example of European moral leadership, which would exercise soft power in order to convince other big countries and blocs to follow suit, such as Japan and South Korea. But when pressed on the issue of the US and China specifically, sources demurred.

As this article goes to press, no national politicians in the United States from either party have commented, despite multiple attempts to reach out and ask if they were willing to implement a similar policy in America.


  1. Michael James

    One source specifies that after frustration with the slow pace of decarbonization in France, in large part due to the Gilets Jaunes’ street riots against higher fuel taxes, Macron sought a Europe-wide approach.

    You’re going to beat that trope to death until you lose your voice like Theresa! In France with already very high fuel taxes, the marginal increase was hardly going to have any meaningful effect on either driving fewer miles or on a switch to electric, or for the vast majority of those concerned (ie. not inner-city types with real options) any shift to transit. This highlights the real barrier to change, to lower transport carbon: cost of electric vehicles. Last night a current affairs program showed this by comparing the two top selling all-electric, one hybrid and the feature-equivalent all-petrol vehicles. The top two lower-carbon vehicles were A$54k and $50k (I forget the hybrid but it was about $40k) while the petrol vehicle was $18k.

    No one is proposing any conspiracy in this. The major manufacturers are going all-out in creating electric vehicles but they are way too expensive to really solve the problem. Australian Labor party (not in power but likely to be this year) have proposed mandatory 50% electric vehicles new-sales by 2030. May be possible but it will require a halving of costs, or subsidies that are infeasible.

      • adirondacker12800

        Maybe perhaps for a few people but I smell a really stinky urban myth. Like the one that Staten Islanders were paying tolls and killing a half hour or forty five minutes to drive to New Jersey to save a buck or two on a tank. When fuel prices were much lower in New Jersey it made sense to plot filling up in New Jersey if you had some other reason to be there but making special trips, nah. But that was the myth.

        • Herbert

          Happens all the time on European borders. Especially since retail diets a lot cross border

      • Michael James

        Seriously? It’s 2 centimes, ie. 1.3% (diesel). But look at the map (in the linked article) and most of France’s other neighbours are less expensive (eg. Switzerland is the same as Italy). By comparison Germany is 15.4% less expensive than Italy. Somehow I doubt Italians are crossing the alps to save on fuel but some Alsaciennes might be nipping across the Rhine …
        (Euros, €; table is ordered on ‘Diesel’; selection of countries).
        Country Super 95 Prem98 Diesel
        Russia 0.62 0.73 0.66
        Luxembg 1.18 1.27 1.10
        Poland 1.11 1.17 1.19
        Austria 1.21 1.36 1.21
        Spain 1.27 1.41 1.22
        Germany 1.39 1.52 1.26
        Denmark 1.49 1.57 1.33
        Ireland 1.37 1.34
        Greece 1.56 1.69 1.39
        Portugal 1.56 1.68 1.44
        Netherlds 1.73 1.79 1.45
        France 1.51 1.56 1.47
        Italy…… 1.56 1.64 1.49

        Switzerland 1.33 1.34 1.49
        Great Britain 1.41 1.50 1.50
        Belgium 1.45 1.52 1.53
        Sweden 1.50 1.55 1.53
        Norway 1.67 1.77 1.62

        • Alon Levy

          The prices for regular petrol have a different spread. IIRC as of 2016 they differed by 20 cents – it’s possible France has since raised them somewhat.

          • Michael James

            First, the increase of fuel tax that was partly the catalyst for Gilets Jaunes was on diesel which is why I used it in the example (it is the far right column in the table).
            Second, one can see that on all three fuel types listed, France is amongst the most expensive.

            In France, for long trips it is always a calculation of fuel costs versus the autoroute tolls. And I suppose time.

            I must admit I am a bit surprised by the variation as I somehow had expected the EU would have normalised such prices across most members.

    • Matthew Hutton

      I think finance can solve the electric car cost issues as they should have a longer overall life.

      • adirondacker12800

        Electric cars’ sticker price is going to be lower than internal combustion cars’ soon. They already are cheaper to own.

        • Tonami

          It depends on the depth of discharge. BMZ Gmbh did some tests on the BMW i3 battery and came up with charge/discharge cycles results ranging from 500 cycles(100% – 0%) to 6000 cycles(70% – 20%). So a Li-ion batter can last 12 times as long operating it between 70% – 20%, than using 100% of the stored energy. The report was covered here

          Also the BMW i3 battery was rated at 4600 cycles by Samsung SDI so a 33kWh version with 183km EPA estimated range will last for 842,000km, far longer than the life of most cars.

          Tesla model 3 and Model S batteries have lifetime warranties meaning the batteries will outlive the cars.

          • Michael James

            Those battery tests were done under ideal (lab) conditions, eg. temperature is a big factor in lifespan and cannot, or currently is not, managed nearly as optimally in the real world.
            Also, you have overlooked the tricky issue of maintaining the battery within those ideal charge/discharge limits. Most have battery management software that will do it for the owner but it can be over-ruled by the owner, eg. to charge to 100% instead of 70-80%; of course this revolves around the range issue.
            Oh, and fast charging also takes it toll on battery lifespan.

            Tesla model 3 and Model S batteries have lifetime warranties meaning the batteries will outlive the cars.

            Or, Tesla have built replacement into their overall (high) costs. Or not; they could just be going for broke to win market share and leave such worries to down the road (sic). And those warranties are probably not bullet-proof as there are clauses about “normal use” and “use within normal bounds” which could rebound on customers. The full history of battery use and charging etc will be downloadable for the vehicle’s life. One problem with Lithium-ion is that these battery packs consist of thousands of independent cells and when one fails it starts affecting, not just overall battery performance, but the cells around it in series. OTOH if a failing battery is detected early then Tesla could refurbish it fairly easily (it is designed for this I believe; certainly the grid-scale batteries are) limiting the cost impact of warranty claims.
            Another issue is that apparently battery warranties do not port over to purchasers of second-hand vehicles–possibly on valid grounds of untrackability of owner responsibility. The fact is that it is very easy to abuse a battery and quickly run down its lifespan.

            Anyway, I repeat that for these reasons it is not at all clear that Lithium-ion is the best solution for transport. It has been dominant on the back of manufacture of lithium batteries for other applications, thus scale and R&D, momentum. But it is still relatively early days. Flow batteries look superior in a technical sense though cost is trickier (they are more expensive at lower scale, but OTOH they don’t suffer any degradation on repetitive daily discharge; obviously they are way behind in industrial scale up manufacture). It might be a replay of VHS versus Beta for video, though I would bet in this case the far superior technology should win out.

          • Michael James

            Interesting that the Chevy Volt managed its batter to stay within 80 to 30% charge. I presume the Prius was the same, for the obvious reason that these don’t suffer range anxiety because they can be rescued by their petrol engines when necessary.
            This download was 2017:

            The battery packs included monitoring systems designed to keep the batteries cool and operating at optimum capacity despite a wide range of ambient temperatures.[44][46] In order to make sure the battery pack would last ten years and 150,000 miles (240,000 km) expected for the battery warranty, the Volt team decided to use only half of the 16 kWh capacity to reduce the rate of capacity degradation, limiting the state of charge (SOC) up to 80% of capacity and never depleting the battery below 30%.[46][47] General Motors also was expecting the battery could withstand 5,000 full discharges without losing more than 10% of its charge capacity.[46] According to GM, as of August 2016, no batteries have been changed due to degradation.

          • Michael James

            Oh, and to match the real-world performance of, say, a 40kWh Li-ion battery, a Flow battery would only need to be 20kWh. And that is why cited range of e-vehicles remains a point of contention, or at best ambiguous.

  2. Tonami

    Agreed those test results will be dependent on real world operations. Regarding Fast Charging though this report says otherwise. Capacity loss due to fast charging had more to do with the temperature rise under charging than the fast charging itself. Here’s a transcribes version of Jeff Dahn’s video on battery life and a quote on fast charging and capacity loss

    The the point is that you get a lot of capacity loss per cycle number when you go slow at high temperature because there’s chemical reactions going on in the cell that are bad. And when you do charge discharge rapidly, all you’re doing is beating the clock. You’re beating the clock on these temperature-dependent times (time-dependent parasitic reactions.)

    So having a good thermal management system to keep the battery within acceptable range during fast charging will have no adverse effect on battery life.

    Regarding flow batteries, they can work well for grid applications where size and weight is not an issue, but in a mobile application the volume and weight requirements to deliver similar performance to Li-ion are huge disadvantages. They are even loosing ground in grid scale applications to Li-ion. Sodium-Sulfur chemistry used to be the king of all electrochemical grid storage applications, but now both that chemistry and Vanadium flow batteries have been overtaken by Li-ion in grid applications due to costs reductions in the latter.

    Regarding the Prius battery, Yes the Prius is the same. At the time the Prius launched in 1997, the prevailing wisdom was that Nickel Metal hydride batteries could only last 500 cycles. However the 1.3kWh battery in the first generation Prius was designed to use only 450Wh or roughly 35% of capacity. The strictly controlled dept of discharge allowed the car to handle the 30-50 daily charge discharge events a hybrid vehicle goes through. Considering both the first and second generation Prius lasted up to 10yrs before battery replacements, that translates to cycle life of 100,000 – 180,000 cycles. A huge jump from the rated cycle life of 500 cycles. As Jeff stated in his presentation, there’s still a lot of unknowns. We’ll increase our knowledge on the technology with time.

    For Buses BYD claims 250km range for it’s K9 eBus from 324kWh suggesting specific energy consumption of 1.26kWh/km. Compared to MAN’s Lion City 12E which claims 200km from 300kWh usable capacity suggesting 1.5kWh/km. But the 12E has a nominal capacity 480kWh. So it’s using only 300 out of 480 or 0.625%. That’s exactly the same dept of discharge percentage as the 1st gen Chevy Volt (10kWh usable out of 16kWh). So I expect good battery life from the MAN Battery Electric Bus. BYD on the other hand does not state any battery buffer whatsoever when quoting it’s range estimates.

    • Michael James

      2019/04/03 – Tonami, 14:38

      Regarding flow batteries, they can work well for grid applications where size and weight is not an issue, but in a mobile application the volume and weight requirements to deliver similar performance to Li-ion are huge disadvantages. They are even loosing ground in grid scale applications to Li-ion.

      I mentioned all those things. Re grid-scale, one has to ask if they are getting value for the notionally lower capital cost. Most such installations are not actually for capacity provision but control issues, ie. voltage and frequency control by the grid operators, for which Li-ion will do the job admirably and the cost, including inevitable replacement issues, won’t matter much. The world’s largest lithium-ion battery is Tesla’s 100 MW, 127
      MWh facility in South Australia, and it is performing excellently because it can earn very nice financial returns on this niche function (it is a “premium” service, which previously was handled partly by gas peakers which today happen to be the most expensive electricity on the spot market in Oz; utter nuts given we have huge gas reserves). But despite what the media and politicians imply it cannot fill in for bulk power provision. Recently RedFlow has won contracts for micro-grids in Fiji to supply ten sites without access to a grid:

      “Lithium performance degrades over time and would struggle with the heat and our desire to run batteries without any cooling, even on days that are hotter than 30°C.
      “Redflow batteries can use fresh unfiltered air for cooling, even where it is likely to have a high salt content, without experiencing corrosion and also present no fire risk through ‘thermal runaway’.”
      Also, Redflow zinc-bromine flow batteries do not have the potential fire risk that’s associated with other battery chemistries … (and) use components that are easy to recycle or reuse.”

      When you talk about “size and weight” (which I did mention as issues) does that compare like-with-like; eg. a 50kWh Li-ion with a 25kWh Flow battery? Or if using Prius-like system (using only 35% capacity), 50kWh versus ≈17kWh? Though I admit to some biases, it is a genuine question since it is frustratingly difficult to find proper analyses of these issues. I think it is also more complex, in the way VHS-v-Beta was, in that scale and subsidy of Li-ion clouds the comparison with Flow; I can’t exactly see why vanadium-Flow should be that much more expensive than Li-ion, especially as it is simpler in some critical ways (eg. no need for thousands of independent cells with all the subsequent monitoring and replacement palaver).
      In any case, my point was that Flow batteries should be a contender for larger vehicles like buses, precisely because of these reasons (and the need/advantages of deep discharge/recharge). For centrally run fleets, there is also the advantage of ‘instant recharge’ via simply swapping (pumping) the electrolytes in the same time it would take to fill a diesel tank.

      The discussion of battery lifespan in the likes of the Prius or Volt is what I talked about but which you ignore as if it isn’t everything: they can switch to a petrol engine at any time, so they can perfectly manage their batteries without ‘compromise” (except to their green claims). The real-world test will be in fully-EV and I don’t mean Teslas because they have “better” batteries simply by virtue of their higher cost. Not to mention in places like SoCal, Arizona or the ultimate test, Australia, where drivers use their air-con most of the time.

      Re fast-charging, obviously the heating is directly proportional to power consumed and so heat management has to be critical in fast charging (another expense and point of failure), as well as itself consuming power (it has to be active cooling). In fact the two situations are not comparable in that slow-charging doesn’t employ active temperature control and fast-charging can’t do without it. Of course this was why the original Nissan Leaf had problems (no active cooling) and why those Californian owners brought a class-action suite against Nissan over their failing batteries. Even with active cooling, one seriously wonders how these things manage in an ordinary Australian summer (recently a record was broken–in Melbourne IIRC–of 6 consecutive days when the daily max didn’t drop below 40°C).

      Jeff Dahn works for Tesla so really … and his whole career is obviously wrapped up in Li-ion …. (again this is just a plea for scientific comparative analyses instead of hand-waving).

  3. Reedman Bassoon

    Probably the best benchmark of a NiMH EV is the 1997-2003 Toyota RAV4 EV. It had a range of ~100 miles, but some folks got over 150,000 miles on the original battery pack (i.e. multiple-thousands of cycles). NiMH is also a benchmark for people who believe in battery technology conspiracy theories, because Chevron acquired a bunch of the patents when it bought Texaco, which bought the patents from GM, which had a partnership with Energy Conversion Devices.

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