Ania Nussbaum reports from France:

France is taking aim at SUVs by raising a tax on heavier and more polluting vehicles, a measure that comes on top of tough new European rules being phased in next year to lower car emissions.

Under a law adopted by parliament this week, cars emitting carbon dioxide above a certain threshold will be subject to a 20,000 euros ($22,240) penalty in 2020, higher than the existing 12,500 euros. At the same time, the government is considering reducing cash incentives for the purchase of electric cars.

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Famously at the end of the last year, the “Yellow vests movement” protested rising fuel prices that were caused partially by climate-motivated fuel taxes. People don’t like to lose mobility.

Taxing high emissions vehicles makes sense as the government phases out EV incentives, but I doubt French car buyers are going to like it.

The measures show policy makers are still finding their way on how best to back a shift to cleaner cars. Sport utility vehicles are among the most polluting because they are heavier and less fuel efficient. Yet they made up 30% of sales in France in the first 11 months of the year, according to Paris-based consultancy Inovev. While electric-car sales are growing quickly, they still make up a tiny proportion of the overall market.

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That 30% of the market will be very interested in the Model Y as it rolls out in 2020.

France’s SUV levy comes as the European car industry prepares for the phasing in next year of emissions rules that will see carmakers fined if their total annual vehicle sales exceed an average carbon limit.

At the same time, France is also seeking to reduce subsidies for electric and hydrogen cars in the years to come on the assumption that prices will drop. In 2020, the central government will give as much as 6,000 euros toward the purchase of an electric car costing less than 45,000 euros. The handout is set to drop in 2021 and 2022, the environment ministry has said.

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More stick, less carrot.

Expect French electric vehicle sales to skyrocket in 2020 if a 6,000 euro incentive is phasing out in 2021. If the Model Y Standard starts deliveries in France in 2020, demand will vastly outpace supply given the SUV tax and limited-time incentives.

In France, Model 3 starts at around 43,000 euros for Standard Plus.

Subsidies to consumers toward buying electric vehicles can be costly. France’s bonuses reached 550 million euros last year, according to the French auditor. Germany has also put in place similar incentives, which BloombergNEF estimates could cost as much as 2.6 billion euros by 2025.

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Giving away money is expensive.

France is raising the pollution tax on SUVs and Trucks to $22,240 starting next week @elonmusk @tesla

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