Taxation

The Taxation Policy related to climate change is outlined below.

Vehicle Registration Tax

The rebalancing of Motor Tax together with the initiative on Vehicle Registration Tax brings a strong emissions focus to the tax regimes for new vehicles registered since 1 July 2008 .  These changes were accompanied by a new labelling requirement for cars that help ensure the consumer is fully informed about the environmental and cost implications of choosing a particular car. Most recently, the National Climate Action Plan considers the recalibration of VRT and motor tax regimes for passenger cars to further incentivise LEVs, as one of their main transport actions (Government of Ireland, 2019).

The Accelerated Capital Allowance

The Accelerated Capital Allowance (ACA) is a tax incentive for companies in Ireland to purchase energy efficient equipment. It allows companies to write off 100% of the purchase value of specified energy efficient equipment in the year of purchase.

Carbon Tax Yields for 2018

House of the Oireachtas ©

Carbon Tax Yields for 2018
House of the Oireachtas ©

Carbon Tax Yields for 2018

House of the Oireachtas ©

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Carbon Tax

A Carbon Tax was introduced by the Government as part of the 2010 budget. The carbon tax applies to kerosene, marked gas oil, liquid petroleum gas, fuel oil, natural gas and solid fuels. The rate of tax, with effect from 1 May 2013, is based on a charge of €10 per tonne of CO2 emitted by the fuel concerned. The rates were increased to €20 per tonne from 1 May 2014.

The 2019 Climate Action Plan acknowledges the need to increase the carbon tax to a minimum of 80 euro per tonne by 2030 in order to meet 2030 national emission targets. This will involve increasing taxes on carbon fuels initially to 6 euro (between October 2019 and May 2020), with tax increases continuing in the years following. The assets raised from this tax are set to be ring fenced to fund new climate action measures including protecting those most vulnerable, experiencing fuel poverty.

Considerations for the Implementation of an Increased Carbon Tax

Recent plans mentioned in the National Climate Action Plan, to increase the national carbon tax to a minimum of 80 euro per tonne by 2030 have brought about discussion around the matter of how to achieve this in the best way, ensuring that vulnerable communities dealing with energy poverty are protected and that provisions are given to allow the public to transition over to a low carbon  economy successfully.

The Oireachtas Committee on Climate action agrees in its recent report, that revenues derived from the increases in the carbon tax should be ring-fenced by legislation rather than put in the central fund. This revenue could then be used to: 

1. Put the proceeds of the increased carbon tax into a fund to be used as follows: a. To compensate those likely to suffer from fuel poverty as a result of low income, poor quality accommodation, or exceptional energy needs, for example by increasing the fuel allowance or other payment, directly alongside the offer of participation in a home energy retrofit or upgrade; and b. To use the balance for climate actions such as energy retrofitting and, 

 2. To return the proceeds by way of a dividend to all individuals or households (“fee and dividend” approach) (Houses of the Oireachtas, 2019). This would result in those on the lowest incomes potentially gaining the most while still incentivising all members of the public to switch towards lower carbon options.

The recent National Climate Action Plan closely follows the carbon tax recommendations from the Citizens Assembly in its report with a strong emphasis on protecting those most affected by such a tax.

The Committee also recommended the Department of Finance to commission an enquiry into the revenue that could be realised through the introduction of a carbon tax on the profits of fossil fuel based corporations and firms. Such an enquiry would  also address corporations and firms linked to high usage of fossil fuels including aviation, shipping etc. Deliberations such as these have a just transition approach to climate action, with a strong focus on equity . 

The most recent CSO Statistical Yearbook of Ireland 2019, highlights the disparity between the allocation of environmental taxes between households and industry. Household environment taxes represented a 58% share (3 billion) of total environment taxes compared to service industry environmental taxes representing a 30% share ( €1.5 billion) of total environment taxes in 2018 (CSO, 2019). Environment taxes levied on agriculture were €0.09 billion representing only a 1.7% share of total environment taxes in 2018. For further information on environmental taxes in Ireland please see the Central Statistics Office website.