Doubts raised over ‘green’ fuel scheme

Date: 15/02/1996

By Fiona McHugh

FRANCE may pay dearly for its clean air.

Not only will the treasury sustain huge losses in tax revenue if draft new environment laws are implemented, but Paris may also find itself in the European Court of Justice for allegedly breaking EU law.

Prime Minister Alain Juppé's announcement last week that the use of 'green' bio-fuels in petrol and diesel would be made obligatory in France by the year 2000 delighted environmentalists and farmers, but furrowed more than a few brows in Brussels.

With the cost of bio-fuels made from vegetables sometimes four times that of 'non-green' fuels, the proposed new rules have been fiercely resisted by domestic petrol and car lobbies.

To offset the extra cost to car manufacturers and defuse the opposition, Paris has decided to scrap part or all of its tax on petrol products. But such tax exemptions, giving French fuel producers an unfair edge over their European rivals, are a flagrant breach of EU law, according to Commission sources.

“These special concessions contravene Article 95 of the Treaty, which forbids the use of fiscal measures which discriminate against products from other member states,” said an EU official.

In an effort to play down the significance of the proposed fiscal incentive, Juppé insisted that any tax privileges bestowed on bio-fuels would be short-lived and that exemptions would be phased out as demand for 'green' fuels grew.