CARBON TAX on domestic solid fuel could open up a huge price difference between the Republic and Northern Ireland, leading to widespread smuggling of illegal high-sulphur coal across the Border, according to lobby group the Solid Fuel Trade Group.
The group, which represents coal importers, has also warned that the proposed tax “may frustrate efforts to tackle fuel poverty by driving already poor households deeper into debt and plunging ‘new’ households into fuel poverty”.
In a document presented to TDs, the group drew attention to the fact that domestic solid fuel in the North is already cheaper due to a 5 per cent VAT rate (compared to 13.5 per cent in the Republic) and an exemption from the British government’s climate levy.
“The proposed carbon tax would introduce a 22.5 per cent wholesale price disadvantage to Republic-based coal distributors – with the end result being the complete domination of the solid fuel trade in the Republic by coal from Northern Ireland,” it warned.
“The solid fuel market in Ireland is predominantly a ‘cash business’, with few barriers to entry. This is a significant and growing black market in fuel emerging from Northern Ireland into the Republic and this illicit activity is only going to become more and more attractive.
“Some estimates suggest that as much as 70 per cent of consumption in the South could be supplied from the North within just three years of the carbon tax,” it said, adding that this would lead to some 320 jobs being lost in Southern-based coal importers’ facilities.
The group’s spokesman Michael Parker said there was evidence of coal being smuggled across the Border and offered for sale as far south as Co Kerry. “Recently, 22 Southern-registered articulated trucks were spotted picking up coal from a colliery in Ayrshire.”
He noted that Scottish coal has a relatively high sulphur content (2 per cent), compared to the maximum 0.7 per cent sulphur permitted in the Republic. “It’s illegal here, but the smugglers could make €2,500 to €3,000 per truck bringing it in.”
Given that the “requisite controls” were not in place to stop this trade, the group said the carbon tax should be “contained at a benign level to limit the scale of such damage” and that effective controls “should be put in place to avoid market distortion on a national scale”.
Referring to the implications for fuel poverty, the group quoted figures from the 2004/05 heating season showing that “the poorest sections of society spent an average of 13 per cent of their disposable income on energy, while the highest earners spent 1.7 per cent”.
“When the proposed carbon tax would see an increase in price of 12.5 per cent for a bale of peat briquettes and 13.9 per cent per tonne of premium domestic coal, the issue of fuel poverty must become a serious concern,” it said, citing the Commission on Taxation report.
“Solid fuel is the prime heating fuel for the elderly and the less well-off. It can be purchased by the bag or by the bale, without requiring a major financial outlay. A further tax on this segment of the community could result in deaths due to hypothermia this coming winter.”
The group added that “the natural decline in [the use of] solid fuel will contribute significantly towards carbon emission reductions and we would urge Government to factor this into any decision taken with regards to a carbon tax on residential solid fuels”.