An Economic and Social Research Institute (ESRI) conference has heard that energy poverty – where a household spends more than 10 per cent of its net income on energy – has increased to 40 per cent of households, up from about 30 per cent in the summer.
Niall Farrell, an ESRI researcher who delivered a paper titled Energy Poverty and Deprivation in Ireland: Updated Trends and Policy Interventions, said carbon taxes could encourage low-income households to move away from fossil fuels most effectively if it was “easy” for them to switch.
“Why is it more difficult for lower-income households to switch? There are issues like credit constraints,” Mr Farrell said. “So making it easier is especially important for that cohort.”
Speaking at the conference on energy poverty in Dublin on Wednesday, Green Party TD Neasa Hourigan said the theory that “consumption taxes will eventually lead to market reorganisation” had not had a “good year”.
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Ms Hourigan, who returned to the parliamentary party last Friday having been expelled for six months after voting against the Government on the new national maternity hospital, said “you really do have to question consumption taxes” to reduce consumption of fossil fuels.
Increasing carbon taxes was a key demand of the Green Party going into Coalition. The budget delivered a €7.50 increase in the tax to €48.50 per tonne of carbon dioxide.
Ms Hourigan said the measure had been “tellingly polarising”. While middle income earners “enjoyed a permanent uplift due to favourable tax-rates, lower-income households were and still are reliant on temporary measures to tide them over for another day”. These include once-off double welfare payments for most welfare recipients and three €200 payments towards electricity bills between October 2022 and February 2023.
While these would protect the poorest households they would not address uncertainty about further cost-of-living increases.
“Uncertainty takes its toll and that level of insecurity is particularly damaging for children... Uncertainty is not a small policy decision. It is a choice to do this every year... Many households rely on the Christmas bonus to deliver Santy every year... and yet there’s never certainty over that payment and that’s a policy choice,” Ms Hourigan said.
“We talk about the huge importance of certainty for businesses in this country, but we need to talk about certainty for single mothers, certainty for children, certainty for grannies and older people, for 20-year-olds out on their own with no family support. What does certainty look like for them?”
Ms Hourigan said “the challenge” with the energy transition was social cohesion. “The increase in carbon taxes secured in the programme for Government are entirely ring-fenced for this purpose in some form or another to make our resources greener, more secure and more affordable.
“However, as the energy transition begins to pick up pace, revenue from the carbon tax will necessarily start to fall. Therefore, we can’t always rely on it as a vital source of funding for things like retrofitting, to provide the billions of euro we need for the energy transition,” she continued.
“These last few months have operated as a significant challenge to people like me in green politics. The belief was that consumption taxes will eventually lead to market reorganisation”. She said that theory “wasn’t having a good year”.
“We are now living through a very real example of whether consumption taxes can push people to change,” Ms Hourigan said.
“I would say, whether we like it or not, that that theory is under question ... The global economy is still vulnerable to volatility in the process of fossil fuels and people find it hard to change behaviour.”
There had been “huge changes in gas and oil prices” and prices had “swung violently” yet there had not been a reduction in fossil fuel use across Europe.
“So where you see that level of volatility and price rises and you don’t see a mass exodus away from fossil fuels, you really do have to question consumption taxes,” Ms Hourigan said.
