France to lower CO2 tax threshold in effort to promote less polluting vehicle sales

02 October 2017

France to lower CO2 tax threshold in effort to promote less polluting vehicle sales

02 October 2017

In its continuing efforts to ensure it becomes Europe’s number one green economy, the French Government is bringing down the CO2 emissions level at which cars start paying a penalty known in France as the ‘malus’.

Until recently, the lowest level of CO2 emissions from a vehicle that attracted a malus was 129g/km. However, France’s Minister of Ecology, Nicolas Hulot, has now announced a new scale to take effect from 1 January 2018, with the threshold lowering to 127g/km of CO2. This will increase the purchase price of vehicles, bringing more into the remit of the taxation.

In addition, the amount of payment added will see the maximum amount charged rise to €10,500, an increase of €500 from its current ceiling price. The plans were announced as part of the government’s new Finance Bill for 2018.

The new structure sees payments increase in seven steps between 120-126g/km, with consumers paying €50, €53, €60, €73, €90, €113 and €140. The lower amount is charged for the current lower threshold of 127g/km, however this will now cost €173, an increase of almost 225%.

The current European target for CO2 levels from new cars sold is set at 95g/km by 2020. The move to tax more polluting vehicles is a step to bring France closer to this target by giving drivers the opportunity to buy less polluting vehicles. In 2016, the average emission rate of CO2 in the country had reached 110 grams, according to the Agency of the Environment and the Control of the Energy (Ademe).

Since French President Macron came into power in May 2017, the country has been looking at ways of reducing the country’s pollution levels, especially though automotive means. In July, the government announced it was banning the sale of petrol and diesel vehicles from 2040, a move that sent ripples through the market and led to a similar decision to be taken in the UK, with China also considering a plan.

In addition, Hulot recently announced that he was planning to increase the duty paid on diesel fuel, in order to bring it within parity of the price of petrol at French pumps. This could be due to falling diesel car sales, meaning the government can recoup some of the diesel duty it is losing, however more likely is the ambition to further penalise diesel drivers and give them incentive to switch to petrol, hybrid or electric cars. France is also introducing financial incentives of up to €1,000 to those interesting in buying a less polluting vehicle, with families who are less well-off receiving €2,000 to trade in.