The Chairman of the Climate Change Advisory Council has said that the target for upgrading the energy efficiency of homes outlined in yesterday's Climate Action Plan will not be achieved unless the rate of carbon tax is increased.
Speaking to the Oireachtas Select Committee on Budgetary Oversight, John FitzGerald explained that retrofitting and energy upgrades require householders to invest significant sums of money to save on future energy bills.
However, the value of the savings to be made will be greater if the carbon tax rate is higher.
At the current rate of €20 per tonne of carbon, Mr FitzGerald said the savings are not high enough to justify the investment in deep retrofit energy upgrades for householders.
He said that the carbon tax would need to be between €30 and €80 per tonne to make such investment worthwhile.
The all-of-Government Climate Action Plan included a target of upgrading 500,000 existing homes by 2030 as well as the installation of 600,000 heat pumps by 2030, with two thirds of them to be installed in existing buildings.
It also targeted measures to radically reduce the number of petrol and diesel cars on our roads and replace them with up to one million electric vehicles by 2030.
However, Mr FitzGerald told the Oireachtas committee that carbon pricing alone will not deliver emission reductions, but that emissions reductions will be almost impossible without a very substantial increase in carbon taxes.
The Climate Change Advisory Council Chairman also stressed that although the carbon tax is currently set at €20 per tonne, the value of all carbon emissions saved today were actually worth €80 per tonne to the Exchequer.
He said savings of that level should be included by officials when considering the benefits of climate related policies and investments being considered by the Government.
Dr Kelly De Bruin, a Senior Research Officer at the ESRI, told the committee that a study conducted by the ESRI showed that rural households are likely to reduce their emissions more than urban households in response to any increase in carbon tax, and that the welfare of rural households is affected proportionately more than urban households by carbon taxes.
Every €5 increase in the carbon tax raises about €100m in extra revenue for the Exchequer each year.
Dr De Bruin said that there is a concern that carbon taxes are regressive in nature, meaning that lower income and vulnerable households lose proportionately more of their income from carbon taxes than higher income households do.
However, she said the ESRI study showed that a well designed carbon tax regime where the proceeds of the tax are redistributed to address such imbalances can be used to compensate lower income families and ensure that ultimately a carbon tax increase could make lower income families better of.
Mr FitzGerald explained to the committee that a much earlier ERSI study had shown the reason why rural households are more affected by carbon taxes is due to the fact that they tend to commute longer distances to work and so spend more on petrol and diesel.
He said one of the reasons a carbon tax increase is required is to convince those rural commuters to become early adopters of electric cars.
Frank Maughan, a Senior Civil Servant from the Department of Communications Climate Action and Environment told the committee that the Government had already spent about €120m to buy carbon credits.
He said that at least €13m more would be required for credits to make up for the fact that Ireland will fail to achieve its greenhouse gas emissions targets for 2020.
Mr Maughan also outlined that further fines, tentatively valued at up to €75m, are expected to be imposed on Ireland because of a failure to achieve separate renewable energy targets by 2020.