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Elections point to green light for Budget increases in carbon taxes

Leo Varadkar at the European Election count in the RDS, Dublin. Picture: Gareth Chaney / Collins

Households face hikes in fuel and heating costs as the government ramps up planned carbon taxes in the wake of a 'green surge' in the European and local elections.

A fourfold rise in carbon taxes backed by the government and climate action TDs could add over €10 to the cost of filling a diesel tank and over €8 more on a bag of coal.

There is a feelgood factor for the Greens and environmental issues are firmly back on the table after significant election wins for the Opposition party. But the public mood may shift come October if the government decides to increase carbon taxes on fuels, coal, peat and possibly motor tax.

After the so-called 'green wave' of elections' support, Taoiseach Leo Varadkar will feel he has a mandate more than ever to hike up carbon taxes. But, how much extra will households pay?

Carbon taxes already exist. The levy applies to oil, gas, diesel, petrol, coal and peat and basically any fossil fuel that emits CO2. The levy is applied at €20 per tonne of CO2 which equates to an estimated €400million yearly for the exchequer. For family homes, it adds about €2.10 to the cost of a 40kg bag of coal, 45% to a bale of briquettes and 5.3 cents to a litre of diesel.

If the levy is increased to €80 a tonne, this would add an estimated €8.40 to the average price of a bag of coal, €1.8 to the cost of briquettes and €10.4 for diesel-filled vehicles.

The proposed changes are in line, long-term, with an agreement by the Fine Gael-led government and the Oireachtas climate action committee which is to quadruple the tax.

Mr Varadkar, however, says there is no chance of a proposed fourfold increase of the tax to €80 a tonne by this autumn's budget. But he favours increases over time, coupled with other incentives for households such as more electric car charging points and better retrofitting and insulation in homes.

The committee suggested the increases go ahead over a period of ten years.

But, whatever happens, some changes can be expected in the October budget.

Following the green surge, both Mr Varadkar and energy minister Richard Bruton have made it clear carbon taxes will be an essential part of any climate action plan as well as the next budget.

Mr Varadkar said the resounding support for the Greens showed the public had “sent us a message which is they want us to accelerate action on climate change".

The government had, in last October's budget, originally baulked at the idea of carbon tax hikes.

Other measures being flagged on the forthcoming climate change plan and budget preparations are changes to motor tax.

Any further increases beg the question if refunds will be given to lower-income households or if tax credits will apply.

The cross-party committee said public consultation was required, including the issue of refunds for households vulnerable to fuel poverty.

The other option the government must decide is if it will ringfence the new tax revenue and plough it into grant schemes or low-interest loans for businesses or homes to help reduce the carbon footprint.

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