Carbon tax

It was hailed as a major weapon in the fight against climate change, but France's plan for a domestic tax on carbon emissions has been shelved.

The government had to backtrack on the idea after France's highest court struck down the bill, insisting it had too many loopholes for industrial polluters.

But the government - still smarting from a massive defeat in regional elections on Sunday- appears to be more worried about the impact of a carbon tax on the French economy.

"In that spirit, I would like to indicate the decisions we are going to take regarding sustainable development have to be better coordinated with all European countries, so as not to widen our gap in competitiveness with our neighbor Germany," Prime Minister Francois Fillon told the French parliament on Wednesday.

Had the bill been signed into law, France would have been the only country in Europe with a tax on carbon emissions, which would have put French businesses at a disadvantage.

Fillon added that France would push for an EU-wide scheme to harmonize environmental taxes in the bloc.

Industry relieved

France's main business association, Medef, on Wednesday welcomed the government's latest move.

"We are relieved for industry as a whole, which would not have been able to bear this new handicap to competitiveness," Laurence Parisot, the head of Medef told Reuters.

The carbon tax is just one of many government policies French voters are unhappy about. President Nicolas Sarkozy's government is under pressure after the ruling party, the UMP, lost all but one region to the Socialist alliance in elections last Sunday.

On Tuesday, hundreds of thousands of protesters took to the streets of Paris, Marseille, Bordeaux and other French cities, to vent their anger at Sarkozy's reform policies.

Voters are particularly worried about job cuts and proposed changes to the state pension.

ng/AFP/Reuters
Editor: Nancy Isenson