The introduction of carbon taxes in this year’s budget will not leave households worse off, Taoiseach Leo Varadkar has said.
Having decided against introducing taxes on carbon in Budget 2019 last October, Mr Varadkar has made it clear the intention is to introduce them as early as October this year.
“The decision we make on carbon tax would not apply until 2020 unless you are doing it on the night of the budget but that would be a decision we would make nearer the time,” he said.
Mr Varadkar said that he and Finance Minister Paschal Donohoe are looking at two potential models as to how carbon taxes would operate.
“I had a good meeting on carbon tax with the finance minister and with the climate action minister.
“There are two potential models,” he said.
I am of the view that carbon tax is there for a reason, it’s an environmental tax designed to change behaviour. It’s not designed to take money out of your pocket — that’s why I’m very much of the view that the money raised from carbon tax from households should be given back to households.
“There are two ways in which you can do that,” he said.
“You can either give everyone a carbon cheque in the post; you can do that by an individual or by household, and you get that upfront. That’s designed to compensate you for the cost of the carbon. Those who use a lot of carbon don’t benefit as much, those who have low-carbon lifestyles benefit more.
“You can do it that way or you can do it through the tax and welfare system such as an increase in child benefit funded by the carbon tax or an increase in tax credits and welfare,” he said.
The Government is set to develop the proposals by the end of February and will seek to get the support of the Opposition to ensure it the measure has cross-party backing before it is introduced.
“We haven’t decided which to go for.
“I would like to get an all-party consensus around it so what I propose to do is develop a proposal in the first two months of the new year and put that out to the other parties to see if they are willing to be supportive of it,” he said.
Mr Varadkar did admit that some carbon taxes, including an increase on fuel, may have to happen on the night of the budget to avoid smuggling.
“On carbon tax, you would have to consider if you would bring it in on budget night, which you can do, or you might time it to come in later in the year due to winter costs.
“So you would have to consider that,” he said.
Mr Varadkar said that in Government Fine Gael would raise carbon taxes — which will see the price of petrol, diesel, coal, and other fuels increase — over the next number of years.
Carbon tax is currently levied at €20 per tonne, and a €5 increase would yield more than €100m.
Mr Donohoe declined to increase carbon taxes in last October’s budget but said it is his intention to put a long-term plan to 2030 in place that could see the tax rise to €100 per tonne.
Mr Donohoe defended the move and said: “It wasn’t a non-decision, I made a decision not to do it.”
The finance minister said that he was reluctant to introduce changes without a long-term consensus in the Dáil.