Government to press ahead with carbon tax increases at end of month

Political fallout from move could be very damaging to Coalition, say senior figures

The Government will press ahead with increases in carbon tax at the end of April, according to senior figures in the three Coalition parties.

However, privately, several admitted that while the actual increase itself would be relatively small in monetary terms, the political fallout from it could be very damaging to the Coalition.

At least two Government Ministers, speaking on the basis of anonymity, said that an alternative compensatory package would be needed, in order to “lance the boil”, as one put it.

As yet, details have not been worked out on what that might be. The Government still hopes that the European Commission might give some concession on the VAT rates for fuel, which would allow lower levels of the tax to be applied.


However, a decision on that will not be taken by the commission until later in April. The Government has sought flexibility in a non-prescriptive way but the commission might insist on specific VAT cuts.

While that would allow fuel prices to fall in the short term, the concern of the Government is that when the situation reverts to normal, Ireland might lose its derogation and have no choice but to impose higher VAT rates than those there at the moment.

A spokeswoman for Minister for the Environment Eamon Ryan pointed out on Monday that the carbon tax increases due at the end of April on home heating would amount to rises of no more than €1.40 a month on a gas bill and €1.50 a month on home heating oil.

“Carbon tax was used to pay for the fuel allowances increase in the budget and also the financing of home insulation for low-income households.

“Curtailing it would mean that this vital work to protect the most at risk of fuel poverty could be curtailed,” she said.

Fuel allowance

Sinn Féin social welfare spokeswoman Claire Kerrane said on Monday that fuel allowance should be extended for six weeks after its expiry date on Friday.

She and party colleagues have called on the Government to back Sinn Féin’s proposal to fund a €1.4 billion package to address cost-of-living increases from the Covid contingency fund.

However, Minister for Public Expenditure Michael McGrath said €1.5 billion of the fund had already been spent or accounted for. He said the balance of €2.5 billion would almost certainly be required for additional spending in the health services, as well as funding the reception of Ukrainian refugees in Ireland.

It is estimated that the cost of welcoming 100,000 refugees to Ireland will be between €1.4 billion and €1.7 billion. However, Mr McGrath did not rule out sourcing funds elsewhere to meet the increased cost-of-living challenge.

Mr Ryan said the new report by the Intergovernmental Panel on Climate Change on climate change mitigation confirmed that all sectors must significantly reduce their emissions.

“It highlights that increased use of renewable energy, improved energy efficiency and fuel switching have reduced global carbon dioxide emissions – across industry and the energy sector.”

Taoiseach Micheál Martin defended Mr Ryan’s call for people to take shorter showers and cut out one car journey a week to bring down their energy costs.

Mr Martin said: “Energy efficiency makes sense anytime of the year, crisis or no crisis, and let’s not be so dismissive of that.”

Harry McGee

Harry McGee

Harry McGee is a Political Correspondent with The Irish Times

Cormac McQuinn

Cormac McQuinn

Cormac McQuinn is a Political Correspondent at The Irish Times