A key element of the French president's wide ranging green proposals announced last month is the introduction of financial incentives that will speed up the renewal of the French car fleet and help reduce average fleet CO2 emissions from the current 176 g/km to 130g/km by 2021.

According to Michel Dubromel, head of transport and mobility and France Nature Environnement, an environmental NGO, the scheme would take the form of an annual bonus-and-penalty system.

This could be similar to the highly successful Dutch system that applies hefty purchase surcharge taxes to high polluting cars, but rewards buyers of fuel efficient cars with a bonus. The Dutch system has been very successful and is being enhanced further. From 1 February 2008 the bonus for highly fuel efficient cars (label A) will be EUR1,400. The penalty for the least efficient cars (label G) will be EUR1,600, up from the current EUR540.

In addition, a CO2 surcharge will be introduced for cars with extremely high fuel consumption. The surcharge amounts to EUR110 per gram of CO2 emission above a specific limit. For petrol cars, the limit is 240 grams per kilometre and 200 grams per kilometre for diesel cars.

According to Ben Lane of transport consultancy Ecolane, the Dutch tax system has had the effect of increasing purchases of cars in segments A and B by 100% in its first year. They had expected a 10% increase.

Vehicle purchases in France already are influenced by a regional tax on registration certificates (carte grise).  According to the European vehicle manufacturers trade association ACEA, basic tax is quite low, varying between EUR25 and EUR46 for each region. However this is increased quite significantly for cars emitting more than 200g/km. A car emitting 275g/km will pay an extra EUR200.

Eleven EU member states currently have CO2-related taxation, although only six of those are applied at the time of purchase.

European vehicle manufacturers have welcomed more CO2 related taxation. ACEA said that a CO2-based taxation system "raises customer awareness and gives a political signal that society attaches a priority to reducing CO2 emissions". However ACEA prefers taxes on use rather than at the point of purchase. Although taxes on use can ultimately be more significant financially, they are difficult for consumers to understand at the time of purchase. Cost is a part of the decision-making decision, but calculating fuel costs over the ownership period is not, said Lane.