The French government has signalled that it is dropping a plan for a tax on domestic carbon dioxide emissions.
Jean-Francois Cope, parliamentary leader of the governing UMp party, was quoted as saying the tax would be Europe-wide or not (exist) at all.
prime Minister Francois Fillon told parliament that the government should focus on policies that increased France's economic competitiveness.
France had been rethinking the tax after a court rejected it last year.
The Constitutional Council said there were too many exemptions for polluters in the tax plan, and that a minority of consumers would bear the burden.
But president Nicolas Sarkozy's government had still been planning to push through a revised version of the measure later this year.
German competition
Had the plan been approved, France would have been the largest country to impose a carbon tax as part of efforts to tackle climate change.
We have to amplify measures that help reinforce the competitiveness of our economy, Mr Fillon was quoted as saying by Reuters news agency.
In that spirit, 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.
Environmental agencies expressed dismay on Tuesday, while the head of the French business federation Medef expressed relief.
The European Commission said earlier this month that it was planning an EU-wide minimum tax on carbon as part of the EU's green energy agenda - though the UK opposes such a move.