Report Urges Rapid Introduction Of Irish Carbon Tax

by Jason Gorringe, Tax-News.com, London

31 July 2009

The Economic and Social Research Institute has released a report that evaluates how the Irish government could reduce carbon dioxide emissions in Ireland. Authored by Sue Scott and Thomas Legge, the report advocates the use of higher taxes on less environmentally-friendly products and industries, and the introduction of subsidies and incentives to encourage the use of those less-damaging. Many European countries are currently considering taxation as a method to police carbon emissions, which has become a major talking point among policymakers given eco-friendly Sweden’s current European Presidency and the forthcoming Copenhagen Summit, to be held in December, where a new, more ambitious, agreement on cutting global warming will replace the Kyoto Protocol.

Noting a changing outlook on environmental issues by European citizens, and a general shift in many governments’ policies on the matter, the report advocates that Ireland take immediate action in line with Europe and lock in reforms early to mitigate the cost of reducing emissions.

The report advocates the following measures:

• “Legislative approaches: The Government directly controls a large part of the economy, e.g. through regulation, the public service, and its vast ownership of buildings and vehicles. A genuinely independent Climate Change Commission could ensure consistency across policies and encourage public participation.
• Market- and incentive-based approaches: Emissions trading and carbon taxes are good at securing emission reductions at least cost. Carbon taxes should be used to cover the approximately 70 percent of Irish emissions that are not covered by the EU Emissions Trading Scheme. Revenues should be used to offset income or labour taxes to aid competitiveness, with a share set aside to help the vulnerable. Experience with this approach elsewhere has been favourable and widespread adoption would be ideal.
• Standards and regulations: These can be crude and costly, but standards and regulations help in instances of market failure, e.g. buildings insulation and spatial planning.
• Subsidies: These require higher taxes to fund them and in the absence of carbon pricing they can be ineffective or even counterproductive. They are appropriate for research and development of technologies, though carbon pricing is needed to encourage adoption."

“If the Government does not apply policies that ensure that a long-term credible price applies to all carbon emissions, accompanied by measures that support society, competitiveness and innovation, the nation will pay more to achieve its goal,” warns the report’s authors.

Concluding, the authors urge that, whilst discussions on the matter are far from complete, certain measures can be taken at an early stage to ensure the success of Ireland’s decisions. The report underscores that proposals should be separate from "political interference"; drafted with the future in mind; and that there should be “clearly defined incentives through a price on all carbon, and a transparent, dynamic and fair process with which the public can engage.”

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