A fourfold increase in carbon taxes is “on the table” for the forthcoming budget, Taoiseach Leo Varadkar has declared.
Major spikes in household energy bills and car fuel will have to occur to fund the shift to renewable energy, the Government is warning.
Mr Varadkar confirmed yesterday that increases in carbon taxes are intended in October, while Energy Minister Richard Bruton said bills will have to rise to end the State’s reliance on fossil fuels by 2030.
Mr Varadkar confirmed under questioning that carbon taxes will feature as part of the budget this year, but rejected the increases could reach €1,500 as forecasted by the Economic and Social Research Institute (ESRI).
Instead, he said the increases would be in line with the Oireachtas Climate Action Committee’s recommendation of €80 per tonne, which is four times the current limit.
Having backed away from introducing carbon taxes in last October’s budget because of a backlash from Fine Gael backbenchers, consumers will be bracing themselves for the extent of the increase this year as Ireland seeks to improve its woeful environmental performance.
The Taoiseach, who declared Ireland is a laggard when it comes to decarbonising our economy, said the purpose of the carbon tax is “not about punishing you in the pocket or raising revenue for government”.
“We want to ensure money goes back to people by way of tax credits and other measures,” he said.
He added that increasing carbon tax is only part of the solution, but on its own, it is not the total solution.
He was speaking as Mr Bruton raied the target from 55% to 70% for the amount of electricity generated from renewable sources by 2030 but admitted this ambitious goal will need to be funded.
“We are not going to be able to deliver renewable sources of power at nil cost,” said Mr Bruton. “The reason the world has got hooked on fossil fuels is that it is a cheap source because no one has taken account of the damage done by said fossil fuels to our climate which is truly catastrophic.
“I will be committing to raising the amount of electricity generated by renewables from the 30% now to 70% by 2030. That will be a very substantial step-up in ambition in terms of renewables. It will require significant changes, we will have to strengthen our grid. Of course, we will have to look beyond onshore wind and will have to prepare for significant offshore wind capacity in our system.”
The current tax on the use of fossil fuels such as oil, petrol, diesel, gas, coal and peat is levied at €20 per tonne.
Recent research by the ESRI indicates a massive rise would be required in the next decade — to €300 per tonne — if Ireland is to meet its commitments to reducing CO2.
The committee is divided over whether carbon taxes should be increased over the next decade in an effort to reduce emissions.
Fine Gael, Fianna Fáil, Labour, the Green Party, and some Independents broadly agree on setting a trajectory for increasing the tax on carbon from €20 per tonne to €80 per tonne by 2030.
People Before Profit is against increasing carbon tax. Sinn Féin has indicated it did not favour higher taxes while supports for decarbonisation of transport and more significant grants for retrofitting houses were not in place.
Finance Minister Paschal Donohoe almost included a €10 increase in carbon tax in the budget, only for a later change of mind, departmental documents show.
A pre-budget submission for the minister prepared by his officials reveal that he had been preparing to sign off on the tax hike in advance of Budget 2019.
However, the increase never went ahead amid fears over Brexit and how higher costs would impact those who didn’t have options to choose renewable energy sources. Mr Donohoe wrote: “I am currently minded to implement a €10 increase on Budget Day.”