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Explainer: What are all these rows about carbon tax about and will I end up paying more?

The Special Oireachtas Committee on Climate Action has approved a recommendation to quadruple the tax to €80 per tonne by 2030

Image: Shutterstock/FREEDOMPIC

SINCE LAST SUMMER, you have probably heard about the government’s plans to increase the carbon tax in a bid to tackle climate change.

Carbon tax currently applies to carbon dioxide emissions from the burning of turf, coal and other fossil fuels. It is charged at €20 per tonne of CO2 and is applied at the point of sale.

However, the latest is the Special Oireachtas Committee on Climate Action has approved a recommendation to quadruple the tax to €80 per tonne by 2030. But some people aren’t happy. 

Who disagrees with the carbon tax increase? 

Well, Fine Gael backed the recommendation, though Fianna Fáil got into a row at the committee meeting about clarification about supports for those in fuel poverty. 

Fine Gael members accused Fianna Fáil’s Timmy Dooley of attempting to “water down” the report.

TD Martin Heydon said the cost trajectory gives people “certainty” about what they will have to pay, but was quick to add that it is not a revenue raising tax, and is merely being introduced to change people’s behaviours. 

Taoiseach Leo Varadkar also said this week that the carbon tax will not solve climate change issues, but is just one of a suite measures the government plans to roll out. 

Dooley said his party agree with the carbon tax increase, and in the end, an amendment was added to the 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, by the end of June. 

So, Fianna Fáil and Fine Gael – the two parties in the cosy confidence and supply arrangement – are okay with the tax. Others that are happy enough with it are the Green Party. 

Parties who were unhappy with it include People Before Profit and Sinn Féin, with both parties producing their own ‘minority reports’.  

Bríd Smith criticised the majority of the committee who supported the increase in carbon tax, stating that they were “disgraceful” and speaking out both sides of their mouth, due to them blocking her own fossil fuels bill, but supporting tax increases on ordinary people. 

She said the report will a “fig leaf” for the government’s plan “increase carbon tax on ordinary people while big business and agri-food giants get a pass”. 

Sinn Féin’s Imelda Munster and Brian Stanley repeated lines the their leader Mary Lou McDonald had said in the Dáil, that a carbon tax will not change people’s behaviours. 

“Sinn Féin rejects this increased carbon tax. A fair, green alternative is possible,” the party said in a statement. 

Okay, but what does this mean for my wallet? When will I pay?

Any changes to the carbon tax will not apply until 2020, unless the measures are introduced on the night of the budget this year. The Taoiseach said in January that he had not decided yet if that would be the case. 

Then every year from then, the price will increase up to €80 per tonne, so yes, you feel the price hike on things such as petrol, diesel and other fossil fuels (impacting other things like home heating fuel). 

I hear we might get a cheque or rebate to offset it? 

Yes, that’s the government’s plan. They think that increasing carbon tax will change our behaviours around fossil fuel consumption, and state they don’t want to bring it in to raise revenue. 

The Taoiseach said there are two ways of doing this – either giving everyone a carbon cheque in the post or giving it back through the tax and welfare system such as an increase in child benefit funded by the carbon tax or an increase in tax credits and welfare.

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When did the government first float the idea of increasing the carbon tax?

Back in August, Varadkar said he planned to bring it in for Budget 2019, but he later rolled back on that, stating that he had a choice between hiking up VAT or increasing the carbon tax. 

However, if you cast your mind back to that time, there was a lot of speculation that the Taoiseach was considering calling a general election. What do politicians like to avoid doing before the go to the polls? That’s right, increase taxes. It tends not to serve them well on the doorsteps. 

In the end, an election did not materialise, so the government is now pushing on with it.

So, what’s next? 

In the committee’s view, which is likely to be adopted by government, the Minister for Finance Paschal Donohoe will set out a carbon price trajectory that rises to €80 per tonne by 2030. 

Before any such tax can be rolled out, the government must examine the impacts on low-income families and on those who “may not be in a position to immediately transition from fossil fuels, including the potential use of social protection mechanisms such as tax credits and welfare payments. 

The report states that a review should be completed by June 2019 into the extent of fuel poverty across all cohorts of society, and a public consultation should be launched into the carbon tax increase proposals. 

The results of the review and public consultation should form the basis of a draft policy paper, which will be submitted by the end of June 2019.

The local elections happen before then, so it could well be a move that gets some push back from Fine Gael members on the ground. The Taoiseach has said he wants cross-party support on the issue before rolling it out in 2020 – but that has already proved problematic, and that was only getting the committee’s report over the line. Either way, this issue won’t be going away for some time yet. 

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