'Cow tax' may be introduced to reduce emissions

 

THE GOVERNMENT may have to introduce a “cow tax” to help it meet new tough targets for reducing greenhouse gas emissions laid out in the EU’s climate change strategy.

It has also been warned that Irish firms may relocate outside Europe to escape the cost of complying with European legislation requiring emissions cuts of 20 per cent by 2020.

Senior officials have told Minister for Environment John Gormley that imposing a levy on all livestock is the best way to avoid having to cut the size of the national herd. Reducing the size of the national herd “could have serious impacts on economic and social life in rural areas”, according to a departmental memo released under the Freedom of Information Act.

Under the EU’s climate strategy, which was agreed in December, Ireland must reduce greenhouse gas emissions by 20 per cent by 2020, when compared to 2005 levels. But the memo warns it faces major challenges in meeting the target because agriculture accounts for 26 per cent of overall emissions and reductions in the sector are difficult to achieve.

To maintain the size of the national herd, the Government will have to offset emissions from livestock by identifying emissions’ reductions in other parts of the economy or by purchasing allowances from other EU states. In a memo dated last July, Mr Gormley is advised to follow the “polluter pays” principle by raising money from those engaged in the activity of raising cattle.

The revenue raised could ring fenced to pay for emissions reductions efforts in other parts of the economy or to buy tradeable credits to emit CO2.

The memo details the cost of offsetting methane produced by Irish livestock and the likely revenues produced by a levy. It proposes a levy set at €5 per tonne of CO2 emitted, which generate revenue worth €104 million for the Government. This implies a levy of €13 for each dairy cow, €7 for non diary cow, €1 for sheep, it says.

The memo suggests the levy should be passed through the consumer, perhaps by way of statute in a similar fashion to the plastic bag tax. Under this approach the Government would have to determine the size of the levy on meat and dairy products. But the memo concedes that market forces might not always allow this to occur. It also notes that such a levy would “undoubtedly be strongly opposed by the agricultural sector interests”.

The Irish Farmers’ Association said last night it opposed a “cow tax”. In a recent policy document, the IFA warned a levy would simply cause the beef and dairy industry to relocate to South America, which could result in more environmental damage.

A spokesman for Mr Gormley said the levy was “not under consideration at present”, however it is understood the Commission on Taxation is considering the sensitive issue.

Meanwhile, a separate memo released to The Irish Times shows that the Department of Enterprise, Trade and Employment warned the Government last year that a key element of the EU’s 2020 climate strategy could force Irish firms to relocate outside Europe. “It is clear that auctioning of allowances poses a real threat that industry will relocate to countries outside the EU who do not require industry to pay for carbon,” says a department memo outlining the strategy could cost heavy industry up to €5.4 billion.

The memo, which accompanies a report by Forfás on the proposed auctioning of allowances under the Emissions Trading Scheme (ETS), estimates the direct cost to industries within the ETS at between €4.6 billion and €5.4 billion.

Under the existing ETS, the Government gave away most of its emissions allowances for free to the biggest polluting companies in the State. But under the EU’s new climate plan, companies in most industrial sectors will have to buy allowances to permit CO2. It is hoped this will encourage them to cut emissions and help the Union meet its target.

The sectors most at risk of “carbon leakage”, whereby firms relocate outside the EU are: cement, aluminium and the food and drink industry. The EU will decide next year if any of these sectors can be exempted from buying allowances to prevent carbon leakage.