“If we don’t prepare properly for the climate change impacts that are already occurring and which will intensify over the next few decades the long-term effects to the exchequer and society in general will be immense.” That was the message from the Environment Minister John Gormley as he introduced a Carbon Tax.
The new tax, €15 per tonne, was announced as part of the 2010 budget. In addition to the carbon tax, a Climate Change Bill and a car scrappage scheme were introduced.
Heralded by Gormley as “the most cost efficient way to reduce emissions,” the carbon tax will result in €4.2 cent extra per litre of petrol and €4.9 cent extra per litre of diesel. From May onwards, homeowners will also have to pay €2 extra on a bag of coal and over €52 extra for 1,000 litres of home heating oil. Electricity bills will remain unaffected because the price of carbon is already included in the cost of electricity due to the fact that ESB and other power generators are signed up to the EU Emission Trading System (EU ETS).
The carbon tax will yield €250 million in 2010 and €330 million in 2011. €130 million of this money will be channeled into making the country more energy efficient by insulating homes. Homes in ‘energy poverty’ and social housing will be a priority. It is predicted that up to 6,000 construction jobs will be created. The winter fuel allowance will be increased by 11 per cent from September to compensate people on social welfare and pensions. The Government has claimed that this will help make cuts in VAT and employers PRSI.
Climate Change Bill
Minister Gormley has set out a framework for a Climate Change Bill that would see key policies and principles guiding the climate change agenda “enshrined” in legislation for the first time. He hopes to progress the bill in the first quarter of 2010.
The Bill would set target of a 3 per cent average annual reduction in net greenhouse gas emissions extended out to 2020, and an 80 per cent reduction on 1990 levels of greenhouse gas emissions by 2050. It would also see the creation of a high level group of experts forming a Climate Change Committee, supported by a new Office of Climate Change.
Car scrappage scheme
When vehicles over 10 years old are scrapped in exchange for a category A car, a VRT relief of up to €1,500 will be granted. Category A cars include those with emissions of less than 141 grammes per kilometre.
The environment department plans to look into the creation of a green international financial services centre and the Minister plans to introduce a green procurement system for the public sector.
In addition, all key rail and bus public transport projects planned for 2010 will go ahead but 94 road projects that are in the early stages of development will be reviewed in light of the Government’s ‘Smarter Travel’ policy that sets out a clear path to significantly reducing emissions in the transport sector by 2020.
IBEC expressed regret that the carbon tax is mainly a revenue-raising measure and suggested that the levy should be used to support energy efficiency and labour cost reduction measures.
Environmental organisation, Friends of the Earth welcomed the introduction of a carbon tax and the fact that the revenue will be used to reduce payroll taxes and finance rural transport and energy efficiency. However it says the large energy companies should pay the carbon tax because they got their pollution permits for the ETS for free but still increased their cost process for customers. They say the car scrappage scheme is a “waste of money” and it would have been better to wait until “the infrastructure was there to allow electric cars go mainstream.”
Fine Gael leader Enda Kenny criticised the fact that solid fuels and agricultural diesel were not exempted from the carbon tax for two years “because they are used by elderly people and farmers who [in the case of farmers] have seen a 28 per cent drop their incomes.”