The chairman of the independent Climate Change Advisory Council has rebuffed political opponents of a carbon tax by saying “there are very few carbon tax deniers in the economics community”.
Prof John FitzGerald told the Oireachtas Budget Oversight Committee that there was a “massive body of evidence from across the world showing that carbon taxes are essential to tackling climate change”.
“A recent statement by a very large number of US economists identified carbon taxes as an essential first step to tackling climate change.”
The strong defence of carbon taxes by Prof FitzGerald, formerly of the ESRI, will be received as a response to political parties which oppose carbon taxes, namely Sinn Féin and People Before Profit.
Richard Boyd-Barrett of PBP challenged Prof FitzGerald at the committee describing it as a regressive tax, and also as a tax that did not impact on climate change.
He instanced British Colombia, where a tax did not stop emissions from increasing. Prof FitzGerald responded it was the same in Ireland where emissions have increased despite a tax of €20 a tonne being in place. He said it was his view that without the tax the emissions would have been higher.
Earlier, in his opening submission he said that carbon pricing alone would not result in the necessary emissions reductions but that without a carbon tax, reducing emissions would be more expensive and “almost impossible”.
He also recommended that the tax be increased by €15 a tonne in the next Budget to €35 a tonne. That would add about 4 cent to a litre of petrol or diesel and about 40 cent to the cost of a packet of briquettes.
Dr Kelly de Bruin of the ESRI told the committee that a “major concern of a carbon tax was that it was regressive in nature”.
She told the committee the most regressive situation was when the revenue was used to reduce government debt. It had an impact on national income, in wages, particularly for the low paid.
Dr de Bruin also compared other methods of distributing the tax. The first was a so-called “dividend’ or lump payment to households. The second was a social welfare transfers. Both of those reduced the regressive nature of the tax.
The other method examined by the ESRI was recycling the tax to create a so-called double dividend, where other distortionary taxes were reduced. They could include reducing wage taxes, corporate taxes or VAT. These had a significant impact, resulting in an increase in GDP and having a positive income on households. However, more affluent households benefited most.
Later, Prof Fitzgerald told the committee the best way with dealing with the regressive nature of the tax would be distribute half of the revenue via social welfare for less well-off households, and recycle the other half towards reducing other taxes.
Several Fianna Fáil members of the committee, including Lisa Chambers, complained about the lack of costing in the plan, as did Pearse Doherty of Sinn Féin.
Prof Fitzgerald, when addressing the rural-urban divide in the climate action plan, said that farming families would not be affected in a major way. He said those most affected by carbon pricing would be long-distance commuters who lived in rural Ireland but who worked in cities.
