McCreevy seeks views on carbon tax

Thursday, 31 July 2003

Finance Minister Charlie McCreevy has announced the start of a consultation process on proposals for a carbon energy tax, with a view to introducing the measure from the end of 2004.

The tax is aimed at limiting emissions of greenhouse gases in line with Ireland's obligations under the Kyoto agreement.

Mr McCreevy said this was a very important economic and social issue and that it was essential for interested parties to make their views known.

In a consultation paper, the Department of Finance says the tax would be applied according to the carbon content of various fuels, including peat, coal, petrol, diesel and natural gas. Peat produces more carbon emissions than the other fuels and would therefore attract a higher tax.

The proposals would involve new taxes on natural gas, coal and peat and higher taxes on petrol and diesel. The paper sets out the effects of various rates, ranging from €7.50 per tonne of greenhouse gases to €25.

The consultation paper acknowledges that carbon taxes would have implications for competitiveness. It also points out that there would be a disproportionate effect on lower income households, and a significant effect on the rate of inflation. A €25 rate would add nearly a percentage point to the consumer price index. It would also raise €625m for the Exchequer, however.

Employers' group IBEC says it is 'fundamentally opposed' to the introduction of a carbon tax on the business community. It says such a tax will undermine competitiveness, increase inflation and have little environmental benefit.