Bloomberg News

French Ruling Party Chief Rejects Diesel Tax as Ministers Split

March 04, 2013

France doesn’t plan to raise diesel tax, the ruling Socialist Party chief said after its ministers contradicted each other on whether to increase the tariff.

“We can’t have more taxes,” Harlem Desir told France Info radio. “No increase is planned either by the government or the majority. We have to avoid discord between ministers.”

Industry Minister Arnaud Montebourg yesterday said France shouldn’t refill state coffers with a tax change that may hurt local carmakers. The comment contrasts with Environment Minister Delphine Batho’s backing last month of a higher tariff to curb pollution dangerous to health and demand pressure on refineries. Montebourg has sparred with Batho in the past over a decision to ban fracking, used to extract oil and gas from shale formations.

Diesel, making up about 80 percent of the market for fuel used by French cars, has been taxed less than gasoline for decades because of its use for trucks and farm vehicles.

“We can’t create worry or anxiety among the French,” Desir said. “We have to reconcile public health, ecology and industry and jobs. Clean motors would more likely be hybrids.”

French refiners have complained for years that demand for diesel exceeds supply from domestic producers. France imported 20.5 million tons of the fuel last year and exported 4 million tons of gasoline, the Union Francaise des Industries Petrolieres lobby says. Diesel demand grew 7.5 percent to 38.1 million tons last year, while gasoline fell 6.5 percent to 7.3 million tons.

Total SA, Europe’s third-biggest oil company, has invested in its largest French refinery to produce more diesel. About 73 percent of new cars sold in France last year ran on the fuel, figures from the French automakers’ association show.

The diesel tax rate makes it 20 cents cheaper than gasoline per liter (0.26 gallon), according to UFIP. Making the rates the same would hand the government about 8 billion euros ($10.4 billion) of revenue a year based on demand in 2012, it says.

New diesel cars sold in France with pollution filters are “safe,” Montebourg said yesterday in an interview with iTele. “The problem is old diesel cars that pollute.” A program to encourge replacing old vehicles for new may help, he said.

“This should not benefit foreign carmakers,” he added.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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