TO MEET IRELAND’S emissions target, the government will quadruple the carbon tax from €20 to €80 per tonne by 2030.
The measure has been well-flagged, but today it was set out in the government’s new Climate Action Plan.
However, while the increase in the carbon tax will come as no surprise, today’s plan contains no detail as to how the increase will be phased in and how the government plans to offset the impact on rural areas and those from lower-income backgrounds.
The plan today outlines that the new carbon tax will be “accompanied by a trajectory of increases over successive annual Budgets”, meaning that any real change to people’s pockets will be felt either after October’s Budget or in 2020.
“Carbon pricing will have a key role to play in the transition to a low-carbon economy and has been recognised by the Climate Change Advisory Council as an important tool for Ireland to achieve its long-term decarbonisation objectives in a cost-effective manner by 2050,” states the report.
Timeline unclear
However, how and when it should be implemented may cause a headache for this government going forward.
Carbon tax has already caused Fine Gael and Fianna Fáil to fall out with each other.
Fine Gael backed the recommendation from the Joint Oireachtas Committee on Climate Action that a carbon tax should be increased, though Fianna Fáil took issue at a committee meeting with a clarification about supports for those in fuel poverty.
Fine Gael members accused Fianna Fáil of attempting to “water down” the committee’s report.
In the end, an amendment was added to the committee’s report which essentially kicked the row between the two parties down the road. The government will have to come up with an evidence-based plan, as well as an impact assessment on who might be negatively impacted by the tax and unable to pay.
Today’s action plan states that decisions will be taken “in a budgetary context on the future evolution of our carbon tax will underpin many of the actions in this plan. This commitment will send a strong signal to householders and firms of the need to invest in low-carbon alternatives, where possible”.
No decision made
When asked about the issue, Finance and Public Expenditure Minister Paschal Donohoe said no decisions have been made as regards the “pacing” of the increases from between now and 2030.
The government’s report states that the “primary purpose of a carbon price is to change behaviour to support reducing Ireland’s greenhouse gas emissions. We will, therefore, ensure that the use of additional carbon tax revenues takes account of the purpose for which a carbon tax was introduced, including consideration of the appropriate balance between a possible dividend-based approach and expanding funding to decarbonisation programmes”.
The ESRI has identified a “high degree” of responsiveness to carbon price, notes the report, but it also recognises that policy design “will be crucial and that sectoral responsiveness will vary”.
“We will carefully examine the impacts on low-income and rural households and those experiencing fuel poverty, as well as broader distributional impacts,” states the report.
It adds that carbon pricing will be considered alongside schemes such as the National Fuel Allowance Scheme, the Diesel Rebate Scheme, and energy efficiency schemes.
“This will include further consideration of how we can balance the objective of upgrading heating systems with fuel subsidisation for low-income households that are using high-carbon heating systems,” adds today’s report.
Warnings of protests
Commenting on today’s plan, the former minister tasked with the climate change brief, Denis Naughten said the objective of carbon taxes should not be to bring in more money, adding that if such taxes are to be successful they should generate less money for government.
“We will face protests such as the yellow vest protests in France if carbon taxes are used to bring in more money and such taxes will hit rural Ireland to a far greater extent than they should. This is not good for families and will not be good in achieving our climate targets,” warned Naughten.
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