Will the carbon tax last long enough to have an impact?

The carbon tax has the potential to spur lasting cuts in emissions but opposition is fierce. Will it last long enough to make a difference?
Will the carbon tax last long enough to have an impact?

Yellow vest protestors in France. Among the issues which caused them to start demonstrating was the carbon tax. Picture: AP Photo/Bob Edme

The transition to a low-carbon economy will not happen overnight. To make it work, we need policies that will remain in place long enough to change how we produce our energy, produce our goods, travel, and grow our food.

The reforms to the carbon tax introduced earlier this year — raising the tax rate gradually each year to reach €100 per tonne of carbon dioxide by 2030 and dedicating new revenues to reducing emissions and increasing social welfare payments — have the ability to spur deep, lasting cuts in emissions in a way that is fair to all. 

These reforms are soundly grounded in ERSI research and consistent with what leading economists tell us is needed to reach the goals of the Paris Agreement.

However, there is a real risk that they will not stay in place long enough to have a meaningful effect. There are two factors that should give the Government cause for concern.

The first is that the 2030 timeline goes well beyond the lifetime of this Government, even assuming the coalition remains stable for the coming five years. Sinn Féin, now the main opposition party, is firmly against carbon tax increases and could well freeze further price hikes if it enters into government. It might even abolish the tax completely, as new governments in Australia and the Canadian province of Ontario have done in recent years.

The second factor is public opposition. The success of the French yellow vest protests in securing a freeze on increases to the carbon tax there (like the Irish tax, it was due to reach €100 per tonne by 2030) provides a clear lesson: Even a well-designed and well-intentioned carbon tax will not last long if it is perceived as unfair. 

Our own experience with water charges confirms as much.

While the carbon tax increase is cushioned by a big spending boost in Budget 2021 — tagged as the ‘biggest giveaway ever’ — subsequent increases may be introduced under far less favourable circumstances. Indeed, in France, several annual increases slipped by largely unnoticed before motorists eventually said non, donned their yellow vests, and brought the country to a standstill. 

With voter support for carbon tax increases at a meagre 32% and industry and consumer bodies such as the Society of the Irish Motor Industry and AA firmly against the policy, the prospect of a veisteanna buí movement emerging is hardly far-fetched.

The good news is that we have the research needed to build a plan to secure the carbon tax’s future (and, with it, our own). In the Guide to Communicating Carbon Pricing I co-authored for the World Bank, we identified some simple lessons from international experience that can guide the Government’s approach.

Firstly, the Government should seek to build a broad coalition of support for the carbon tax. Environmental and social justice organisations have called on the Government to sit down with them to ensure that the most vulnerable are protected from the impacts of carbon tax. Working with these organisations and ensuring their concerns are addressed can help secure valuable allies and give credence to claims that the carbon tax is truly an anti-poverty tool, as the Green Party has claimed.

Secondly, the Government needs to ensure that low-carbon alternatives are in place for citizens and businesses and that these are visible and clearly communicated. The increase in public transport spending in Budget 2021 is a step in the right direction but has been overshadowed by the heavily-criticised Bus Éireann decision to cut three Expressway services next year. 

Seeing is believing, and few Irish voters will believe public transport is improving until new routes are up and running or, at the very least, construction works are under way. 

The Government should ensure this happens soon and draws a clear link to the carbon tax. California, for example, has placed labels on zero-emissions busses to indicate they are funded through carbon pricing revenue.

Thirdly, public-facing communication regarding the carbon tax needs to be improved. Many motorists were unaware of the coming increases before going to fill up their tanks the day after Budget 2021 was announced. 

Upfront communications framing the increases as part of a broader plan for a low-carbon future, explaining how the revenue is being spent, and highlighting support available for citizens to reduce their emissions and their tax bills can help build trust and avoid nasty surprises (with their consequent reactions).

After years of inertia, Ireland is finally on its way to having a climate change policy that, while certainly not world-leading, is slowly catching up. But these new gains remain fragile. The Government must redouble its efforts to build a shared vision of a fair and green future that both the electorate and the opposition will support.

Darragh Conway is the lead legal counsel for Climate Focus.

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