A new study carried out for the Environmental Protection Agency (EPA) found that applying carbon taxes across the board, while compensating low income households, would maximise the incentive to become more energy efficient.
The study, which was carried out by the ESRI, found that carbon taxes need not hurt the economically disadvantaged, because the yield from these taxes could be used to compensate them.
The study found that revenues from carbon tax could provide €246 of compensation to low income households, which would be equivalent to the amount of carbon tax that they paid.
The report examined the effect on households of a carbon tax levied on fuel purchases at the full rate of €20 per tonne of CO2.
Low income households spend a higher share of the weekly budget on energy, because they use fuels that are high emitters of carbon dioxide and because they cannot easily change their heating equipment.
The study found that people who used above average levels of carbon-based energy or who used energy wastefully would be negatively effected by carbon taxes.
