Introduction of carbon tax suggested

The Commission on Taxation has recommended the introduction of a carbon tax to help cut Ireland’s greenhouse gas emissions.

In a report published this morning, the commission said this tax should apply to all carbon-based fuels sold for use in Ireland and should be based on the tonnes of CO2 emitted by each fuel. It said the tax could raise €500 million per year.

“The tax should be clearly visible at the point of final consumption to ensure it is not seen as ‘just another tax’”, the report said.

The Commission said a carbon tax would encourage polluters to cut emissions to save money and encourage innovation. “It is fair in the sense that those who choose to pollute the most, pay the most,” it said.

While there should be no preferential rates, businesses who are involved in the Emissions Trading Scheme should be exempt, it said.

The commission said the tax rate should approximate the current ETS price. It proposes a base price of €20 per tonne of carbon emitted and notes that the ESRI suggested a carbon tax of €20 per tonne could raise €480 million next year and €500 million in 2011.

It encouraged continued research into measures to reduce emissions from agriculture but did not call for a tax on greenhouse gases produced by farming.

Lowering the VAT rate on energy-efficient goods and services should be considered, it added.

“We also recommend that specific arrangements be put in place to ensure that those who experience fuel poverty will be fully protected from the impacts in terms of price rises,” it said.

The Labour Party spokeswoman on environment and climate change Joanna Tuffy said carbon tax should only be introduced “on the basis that they are fair and that they are genuinely aimed at changing our behaviour as users of energy.”

She said she would be “very concerned, despite claims that this tax will be revenue neutral, that these taxes will turn out to be merely revenue-raising”. Ms Tuffy said extra public transport should be provided from the time the tax is introduced to avoid hardship for people living in rural areas.