Carbon taxation is not the only option
A chara, – Much has been written in the last fortnight about our Government’s decision to not increase the carbon tax in the 2019 Budget. While the decision was described by some as “narrow-visioned, short-cycle economics”, our citizens again have shown an appetite for scaling up the response to climate change at a protest rally at Leinster House last week.
This citizen response isn’t just within Ireland. In the US, voters in Washington state will go to the polls in early November in a referendum to decide whether or not they want to impose a “fee” on carbon emissions, with 50 per cent of registered voters in the state supporting the measures. While carbon taxation is a useful instrument, it is by no means the only option to cost-effectively achieving meaningful carbon emissions reductions.
Carbon taxation is one of many market based and “command and control” instruments that also include cap-and-trade, voluntary agreements with industry, subsidies for low- and zero-carbon technologies, emission-reduction credits, product labelling, emission-performance standards, mandates for low-carbon technology procurement and use and fossil-fuel subsidy reductions. I would argue that a combination of approaches is required in Ireland to meet targets and should be based on environmental and cost-effectiveness, and distributional equity.
Carbon taxation does not guarantee the achievement of Ireland’s climate target. It does provide greater certainty regarding costs but excludes action on methane, nitrous oxides and halocarbons. It is also important to consider what use the revenue that is generated is actually put to. Furthermore, evidence has suggested that higher prices resulting from carbon taxation have induced more innovation (measured by patents) and increased the commercial availability of more energy-efficient products, such as air conditioners and water heaters.
Indeed, political pressures often lead to exemptions of sectors and businesses that could potentially reduce its environmental effectiveness, increase costs and result in emission leakage. While the business community would prefer cost certainty, it seems the environmental community favours certainty about greenhouse-gas emission levels. With Ireland’s decarbonisation challenge, attention must focus on the impact on the citizen. A carbon tax is a tax on energy, a necessary good that, given our building stock, would potentially weigh more heavily on rural households and would impact our fuel-poor households and the affordability of warmth. In terms of carbon taxation in times of increasing fossil prices, it is more important to design a policy in such a way that low-income households are not unduly burdened by any costs passed through to energy bills. These considerations possibly shaped our Government’s decision not to increase carbon tax. – Is mise,
Dr MATTHEW KENNEDY,