State may face €610m climate bill in 2020, says Dáil committee

The State could be hit with fines of up to €610 million in 2020 for failing to meet its EU climate targets, the Oireachtas Committee on Budgetary Oversight has warned.

In a prebudget report, the committee said climate change fines could have a significant budgetary impact in the medium term and yet there was little evidence the issue was being taken seriously in budget planning to date.

Based on current emission trajectories and renewable energy use, Ireland is likely to be hit with a compliance bill of up to €610 million by 2020 rising to €3.7 billion-€5.5 billion by 2030.

The committee, which is chaired by Fine Gael's Josepha Madigan, urged the Government to take steps to climate-proof future budgets by examining the possibility of introducing tax measures to encourage a reduction in emissions, using a similar approach to the sugar tax.

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It also called for a review of tax policies that provided fossil fuel subsidies, such as the electricity tax exemption for domestic users; reduced rates of VAT applied to energy; and the diesel rebate scheme.

Childcare and housing

The committee’s report, which follows a series of meetings in the run-up to next Tuesday’s budget, also identified childcare costs and housing as the main barriers to labour market participation in Ireland as well as the chief risks to economic growth.

It suggested any available fiscal space should be used to alleviate childcare costs, particularly for second earners. The committee said re-examining the current childcare cost relief measures with a view to increasing participation rates should therefore be a priority.

Currently the State offers a universal childcare payment of up to €80 a month and a more targeted, means-tested scheme for low-income families.

In a bid to address the current housing supply shortages, the committee also called for a significant increase in investment in social housing.

“If there are limitations on the total amount of capital expenditure available, priority could be given to expenditure on housing,” the report said.

Ms Madigan said: “The committee has conducted its prebudget scrutiny of the budget through a desktop review of budget-related material and meetings with national stakeholders, including two meetings with the Minister for Finance and Public Expenditure and Reform.”

In its report, the committee endorsed the Government’s decision to establish a rainy day fund as a buffer against future economic shocks.

It recommended, however, that, as part of Budget 2018 the Government publish more detailed proposals on how the fund will operate.

It also suggests the Government clarify its timetable for hitting domestic debt targets.