As part of our Climate Action Hub, an ongoing Climate | Focus series of specialised research papers, blogs and commentaries intends to provoke thought and debate in this area of vital national interest.
The latest in the series takes a look at Ireland's implementation of a carbon tax.
The Houses of the Oireachtas Climate Action Hub brings together expertise from across the Service to enhance our provision of climate-related information, research and analysis. With input from our Library & Research Service, the Parliamentary Budget Office, the committees secretariat and the sustainability unit, this hub is a repository of information related to climate action in the Service.
The Climate | Focus series is available on our Climate Hub.
In the latest entry to our Climate | Focus series, a Parliamentary Budget Office paper explores how Ireland has implemented a carbon tax since Budget 2010.
Some key points from the report:
Background
A carbon tax directly sets a price on carbon by defining a tax rate on greenhouse gas emissions or on the carbon content of fossil fuels. In collaboration with the EU, Ireland has set legally binding targets to achieve a carbon-neutral status by 2050 but on current projections, Ireland is set to reach only a 29% reduction in emissions by 2030. As part of its efforts to achieve this target, Ireland introduced the carbon tax as part of Budget 2010.
Rates
The initial rate of carbon tax was set at €15 per tonne, which was subsequently raised to €20 the following year. The Finance Act 2020 has legislated for annual increases to the carbon tax of approximately €7.50 up until 2029 and €6.50 in 2030, when the rate will reach €100 per tonne of CO2. The 2024 rate of carbon tax is €56 per tonne of carbon dioxide.
How is the carbon tax used?
Since Budget 2020, all carbon tax revenues above the €20 per tonne of carbon dioxide rate are ring-fenced. From a total of almost €5.3 billion in total carbon tax revenues, approximately €1.36 billion in such "hypothecated" carbon tax revenues have been deposited to the Central Fund, with a further €788 million forecast to be ring-fenced in 2024.
These funds are used to finance green initiatives and other climate-related policies such as home retrofits and addressing energy poverty. Take a look at the interactive chart above to see how this money was expended in recent years.
Some sectors relying heavily on carbon-based fuels, such as heavy industry, haulage, commercial aviation and farming, are eligible for partial or full reliefs from the tax.