Tax or levy to go green?

 

The options considered by IBEC are among those open to governments confronted with the implications of the Kyoto agreement on reducing greenhouse gas emissions.

The EU carbon/energy tax: applies to all forms of energy and all industrial sectors (including the energy providers such as the ESB).

A levy of 7.6 per cent on energy: This would be equivalent in gross terms to an increase in the VAT rate on energy inputs, such as all forms of fuel, to 21 per cent. It could be problematic politically.

The UK climate change levy: a tax on the energy output of energy producers (such as electricity companies) but does not tax their energy inputs (fuels). It applies to all energy inputs of other industries. The Blair government is proceeding with this but with significant exemptions.

The EU Tax Minima proposals: a variation of the first three options. They apply to energy outputs of energy producers but also to energy inputs of all other industries.

Under Kyoto, Ireland will be obliged to limit its growth in green-house gas emissions to 13 per cent above their 1990 levels by 2010. The growth in emissions on a business-as-usual basis could be much higher than this target. The target level was exceeded in 1998, underlining the potential scale of adjustment needed.