Carbon Tax

The NCCS proposed introducing greenhouse gas taxation from 2002 on a phased, incremental basis across a broad range of sectors in a manner that takes account of national, economic, social and environmental objectives.

In October 2001, the Department of the Environment & Local Government (DELG) published a paper entitled Key elements for a framework for greenhouse gas taxation. This followed discussion with the Economic Sub-Group of the Inter-Departmental Climate Change Team. The paper recommended introducing an energy tax, based on the carbon content of fuels used, phased in over a four year period starting in 2002 / 2003.

The paper pointed out that the purpose of the taxation measure is to provide the appropriate price signals to market actors in order to promote fuel switching and energy efficiency and hence reduce projected energy related emission levels. While short-term price elasticities in response to tax measures can be Iow, the paper points out that they improve over time. Focussing on achieving impact within the commitment period 2008 - 2012, the paper suggests that early introduction of a carbon tax framework will provide an opportunity to maximise these elasticities.

According to the paper, it is understood that the effect of such taxation measures by EU member states has been to reduce CO2 emissions by up to 7% within the span of a decade or less.

In October 2002, DELG prepared a paper for the Green Tax Group entitled Implementing Greenhouse Gas Taxation - Proposal for a carbon energy tax. In this paper, some of the economic consequences of not achieving our target under the Kyoto Protocol were presented. The potential recurring cost to the exchequer of such a shortfall was estimated as being in the range of  12 million to  240 million per annum, depending on the market price for a tonne of CO2 (assumed to be in the range  2 -  20).

The paper proposes the introduction of a carbon/ energy tax of  7.50 / tC02 in 2003 rising over 4 years to  20 / tC02. Assuming a tax of  20 / tC02 in 2010, the emissions reductions achievable in industry are estimated as 0.182 Mt CO2, assuming emissions trading is also implemented with emissions subject to trading being exempt from the tax.

When introducing Budget 2003, The Minister for Finance stated that

'the Government has asked the relevant Departments to advance the plans for a general carbon energy tax, with a view to introducing this from the end of 2004. Given the many implications of such a tax, both environmental and economic, there will be full consultations with interested parties on the design of the tax and a reasonable period is being allowed for its effective introduction.'

Enegy Action Submission to Department on Carbon Tax

Submissions to Dept Finance on Carbon Energy Tax

"The sky's the limit: Efficient and fair policies on global warming"
- An ESRI Conference Date: 12/11/2002

• "The Macro-economic Effects of Using Taxes or Emissions Trading Permits to Reduce Greenhouse Gas Emissions.PDF",
  by Adele Bergin, John Fitz Gerald and Ide Kearney (ESRI). This paper considers the macroeconomic effects of taxes or permits, including the offsetting effects of recycling the revenue through reducing taxes on labour or VAT.
  
• "Carbon taxes: which households gain or lose?"
  by Sue Scott and John Eakins (ESRI). Discusses the income distribution implications of carbon taxes and how the negative effects on low income groups can be offset by transfer payments.
  
• 
  "Implications for Policy (Efficient and Fair Policies to Tackle Global Warming)",
  by John Fitz Gerald (ESRI), draws conclusions on the most effective strategy for Ireland to follow to ensure compliance with its obligations under the Kyoto protocol.