The introduction of a €550 million a year carbon tax in the forthcoming budget could lead to economic growth and increased competitiveness, the national sustainable development council Comhar said today.
In its pre-budget recommendations published today, the organisation proposed raising the tax from a number of sectors, including households, agriculture, transport and services sectors. It said the Government must try to get popular support for such taxes now in order to take "braver" steps on emissions reduction in the future.
It suggested a tax of €20 per tonne of carbon dioxide (CO2) emitted (about five cents per litre of petrol) should be introduced over the coming year and the revenue used “in targeted ways”.
Comhar said the result would be “a growth in GNP, an increase in employment and investment in energy-efficient technologies, leading to a reduction in fuel poverty”.
“The council believes that any revenues raised should be used to reduce labour tax, compensate low-income groups, and promote further emissions-savings activities.”
It said the proposed tax was approximately the same rate as the price facing industry under the EU Emissions Trading Scheme, one of the major pillars of EU climate policy.
“While the EU-ETS is specifically targeted at power-generating industries, Comhar believes a carbon tax and sectoral measures must be introduced to target the sectors not covered in the scheme, in particular the transport, agricultural, residential, heat and services sectors,” the report said.
Comhar’s director of research Dr Lisa Ryan said: “The immediate introduction of a carbon tax would act as a clear price signal to all consumers that CO2 emissions targets must be met.
“The Government has committed to a reduction of 3 per cent per year, on average, in greenhouse gas emissions between now and 2012, and pledged at international level to cut Ireland’s emissions by at least 20 per cent by 2020.”
Dr Ryan said the incentive for introducing a carbon tax has been strengthened in recent times by the economic downturn and yesterday’s revelation that Ireland’s emissions from transport and agriculture will be far higher than expected over the next five years.
“We need to act now to make sure we can meet our climate change targets. We also need to view the introduction of a carbon tax as an opportunity to stimulate our flagging economy.”
Comhar said 40 per cent of revenue raised through a carbon tax should be used to reduce income taxes. It said 25 to 30 per cent of revenue be used to compensate lower-income households, which spend a higher share of their income on fuel.
The remainder of the carbon revenue would be invested in “public good” activities, including the development of alternative energy sources, to further reduce greenhouse gas emissions.
“An initial carbon tax of €20 per tonne of CO2 would generate revenue of approximately €550 million each year,” Dr Ryan said.
“If this was invested wisely, it could provide a boost to the Irish economy and increase consumer awareness of our emissions targets. The carbon tax should be clearly marked on all receipts to raise consumers’ awareness of the carbon implications of their purchases and encourage them to be more carbon-aware.
“In order to really ensure that our emissions targets were met, the suggested rate of €20 per tonne of CO2 emitted would have to be increased on a gradual basis, or additional forms of pricing – such as personal emissions trading – would need to be introduced.
“In order to take even braver steps in the future, the Government needs to secure popular support now for a carbon tax.”
Comhar Sustainable Development Council was established in 1999 as the forum for national consultation on sustainable development. It has 25 members drawn from five areas, including the State sector, the economic sector, the academic sector and NGOs.