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.