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A Carbon Tax for Ireland?
In his
Budget Speech on 7th April 2009, the Minister for Finance provided an update on the
introduction of a carbon tax. He referred
to the commitment in the Programme for Government to introduce a carbon
levy, on a revenue neutral basis, during the lifetime of the
Government. He said that he
expected the Commission on Taxation’s report, which will cover a wide
range of tax options, by the end of September 2009.
The report will assist the Government
in assessing how such a levy might best be structured and
implemented. The Minister looked
forward to making a firm announcement on the issue in his Budget 2010
speech.
The 2007-2012 Programme for Government
set out a vision for Ireland over this five-year period. A priority in the programme was
combating Climate Change and one of the measures the Government proposed
was a Carbon Levy.
The benefits of a Carbon Levy, or of
alternatives such as the Cap and Share system proposed by Comhar, the Sustainable Development Council, must be
assessed in the context of the recent fluctuations in oil prices. At the beginning of 2008, oil stood at
$92 per barrel, rising to a high of $144 in July 08. However, it has since dropped back to
below $50 per barrel in April 2009.
Therefore, if a Carbon Levy or equivalent were to be introduced,
it may only result in pushing the fuel prices back up to the mid-2008
levels.
Without suitable energy alternatives or
practicable energy efficiency measures, the cost of energy may simply
increase as a result of a Carbon Levy.
The challenge for the Commission and the Minister will be to develop
a levy and recycling mechanism to encourage emissions reduction.
The objectives of such a mechanism
would be to:
•
Encourage
alternative energy sources and energy efficiency;
•
Ensure
that the Carbon Levy is ‘cost-neutral’ to individual consumers, and;
•
Prevent
the introduction of non-competitive incentives.
If you are interested in the content of
this article, and would like to discuss it further, please contact Mr. Tom Cleary on +353-1-474 1530 or email Tom.Cleary@boc.ie.
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