Petrol and diesel costs to increase under carbon tax

MOTORISTS face paying more for petrol and diesel under a new carbon tax recommended in the report.

Householders would also pay more for their energy bills, as the tax would apply to all forms of fossil fuel.

Finance Minister Brian Lenihan has already said the Government is committed to introducing the carbon tax in the December Budget.

The tax is one of a number of proposals the commission makes to help protect the environment.

The commission suggests a tax of €20 per tonne of carbon emitted by each fuel. This means that fuels generating the greatest amount of carbon would be taxed proportionately more than cleaner fuels.

In practical terms, such a tax would add roughly 5c to a litre of petrol and the same to a litre of diesel.

The price of a standard unit of household gas would rise marginally, by less than half a cent, while a bale of peat briquettes would increase by 48 cent.

Citing an estimate by the ESRI economic think-tank, the commission said the tax could raise €480m for the Government in 2010, rising to €500m in 2012.

Crucially, it would help Ireland meet its environmental targets, the commission added. Under an EU deal reached last year, Ireland is legally obliged to reduce its emissions by 20% from 2005 levels by 2020 in a number of sectors.

The commission said there was no “price signal” in those sectors indicating that greenhouse gases should be used sparingly.

“Those who emit more are in effect subsidised by those who emit less. A charge that would repair this market failure by rewarding the reduction of emissions and penalising the converse is, therefore, appropriate,” the commission said – hence the carbon tax.

But the commission stressed that the poor should be protected from the tax, saying: “We also recommend that specific arrangements be put in place to ensure that those who experience energy poverty will be fully protected.”

The commission also acknowledged that carbon is just one of a number of greenhouse gases that are highly damaging to the environment.

Methane is another, with livestock – particularly cattle, which belch the gas because of the make-up of their digestive systems – responsible for a sizeable amount of emissions.

But the commission recommended against targeting the agricultural sector.

“Methane and nitrous oxide emissions from agriculture cannot at this time be accurately monitored, reported and verified so our conclusion not to impose a carbon tax is pragmatic.”