France has abandoned its plans to tax carbon dioxide emissions.
A law introduced last year planned to levy 17 euros per tonne of CO2 emitted.
But top judges ruled in December that it was unconstitutional and the tax was scrapped.
Now, the plans have been dropped altogether by the French government.
Prime Minister Francois Fillon told lawmakers in Paris that any such tax should be introduced at the EU level, so as not to put French industry at a competitive disadvantage.
“I would like to indicate that the decisions we are going to take regarding sustainable development have to be better coordinated with all European countries, so as not to widen our gap in competitiveness with our neighbour Germany,” Fillon said.
President Nicolas Sarkozy, who said tackling global warming was a priority when he took office, once hailed the carbon tax as an effective weapon to fight against climate change.
The decision to shelve the CO2 levy drew a stinging rebuke from French Junior Environment Minister Chantal Jouanno, condemning the U-turn as victory of “eco scepticism”.
Business leaders had long argued it would would harm industry and lobbied hard against the measures being brought into force.
In calling for the decision to be taken at the EU level, Paris is in effect definitively ditching the CO2 tax.
Under the bloc’s current treaties, an EU-wide carbon tax would require the approval of all 27 member states.
While France and Scandinavian countries back such a move, the UK and the industry-heavy central and eastern European states are bitterly opposed to it.