Energy tax not environmentally of benefit - IBEC

Energy taxes on industry to meet Irish obligations on the Kyoto Protocol on greenhouse gases would not deliver any significant environmental benefits, a study commissioned by the employer group IBEC has found.

Energy tax would be expensive, with big increases in fuel costs, and could adversely affect competitiveness, according to the study by Farrell Grant Sparks Consulting (FGS).

Energy taxes in their mildest form would add 7.6 per cent to electricity, gas, oil and coal prices, but price rises in excess of 20 per cent would result from other options, of which a carbon tax was most penal.

Excluding electricity, FGS estimated the reduction in emissions would amount at most to 0.26 per cent of the 1997 national greenhouse gas level. This equals less than 2 per cent of Ireland's target under the Kyoto Protocol, which commits the State to limiting emissions of greenhouse gases to 13 per cent above 1990 levels.

The options evaluated imposed gross taxes on industry ranging from £40 million to £256 million. More than 40 sectors of Irish industry, employing 75,000 people, would be vulnerable to an energy tax, the FGS study concludes.

Vulnerable sectors are typically more capital-intensive. The biggest impact would be on electricity production and distribution and manufacture of cement and other construction materials. FGS warns that packaging, plastics, paper and textiles, which have significant energy use, could also be "competitively vulnerable".

The continuing rapid rise in carbon-dioxide emissions in Ireland is a result of the expanding economy, the study notes, but the residential and transport sectors are contributing most. Irish industry emits 20 per cent of national greenhouse gases, compared to agriculture at 35 per cent.

The study's author, Prof Gerry Boyle, professor of economics at NUI Maynooth, said meeting our international obligations must be done at least cost to the economy.

"A suite of measures must be available to control emissions rather than the exclusive reliance on a tax measure," the report concludes. Preferred alternatives to taxes that would greatly enhance flexibility and be acceptable to industry include voluntary agreements and tradable emissions, allowing industries to trade globally.

The National Greenhouse Gas Abatement Strategy is in the process of being finalised by the Department of the Environment before it goes to the Cabinet. A spokesman for the Minister for the Environment said it would consider action across all sectors, including energy taxes.