France Moves to End Diesel's Tax Break Amid Emissions Scandal

  • Environment minister vows to make gasoline, diesel taxes even
  • Decline in diesel's share of Europe car market may accelerate

France plans to end tax breaks for diesel, ending the special status long enjoyed by the fuel in the wake of Volkswagen AG’s emissions scandal.

“It’s obvious today that there’s an inconsistency between the advantages given to diesel and its drawbacks in terms of pollution,” French Environment Minister Segolene Royal told journalists after a cabinet meeting on Wednesday.

Officials agreed that, starting with the 2016 budget, diesel taxes will rise and those on gasoline will fall “to neutralize the difference” in the next five to seven years. The price advantage in France amounts 15 euro cents per liter (89 U.S. cents per gallon) of fuel, Royal said.

The move could help further accelerate diesel’s decline in Europe, where four of the five biggest car markets impose lower taxes than on gasoline. The favorable treatment has helped diesel become the dominant technology for cars in Western Europe. But health and pollution concerns had already begun to erode diesel’s popularity even before revelations last month that VW duped regulators about emissions for these cars.

European auto buyers have been attracted by both the lower pump price and better fuel consumption on diesel cars. About 68 percent of cars and light commercial vehicles on French roads as of Jan. 1 were using the fuel, according to the CCFA, the country’s carmakers’ association. The share had started to decline as cities, including Paris, blame smog on diesel exhaust.

The French government’s announcement comes after Volkswagen admitted that it installed technology in nearly 11 million of its diesel vehicles designed to fool emissions testers. The scandal may cause the technology’s market share to drop to as little as 35 percent of cars sold in Europe in 2022 from 53 percent in 2014, according to industry consultant LMC Automotive.

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