Dáil Éireann debate -
Tuesday, 15 Jun 1993

Vol. 432 No. 3

Ceisteanna—Questions. Oral Answers. - EC Carbon Energy Tax.

Trevor Sargent

Question:

9 Mr. Sargent asked the Minister for Finance if, in light of an ESRI report indicating that the introduction of an energy tax such as that proposed by the European Commission could lead to an increase of 9,000 jobs in Ireland and the fact that such a tax is widely accepted to be an important element in the EC's strategy to meet its CO² stabilisation targets, he will give details of the evidence on which he based the Government's reported position, expressed at the meeting of the Council of Economic and Finance Ministers on 7 June 1993, to the effect that the proposed energy tax could inhibit industrial development in Ireland; whether this evidence is in the form of published or publicly available material; the way in which he considers that the provisions for partially exempting energy-intensive industries, contained within the Commission's proposal, fail to protect the interests of Irish industry as compared with industries in other EC countries; and if he will make a statement on the reason the Government is reportedly not supporting the Commission's proposal.

Desmond J. O'Malley

Question:

41 Mr. O'Malley asked the Minister for Finance the position regarding the proposed EC Carbon/Energy Tax; his views on whether this tax is likely to put numerous community manufacturers out of business because of their inability to compete with third country suppliers; and the attitude Ireland is taking towards the proposed tax.

Peadar Clohessy

Question:

45 Mr. Clohessy asked the Minister for Finance the Government's position at meetings of EC Finance Ministers on the proposed eco-tax; and if he will make a statement on the matter.

Trevor Sargent

Question:

65 Mr. Sargent asked the Minister for Finance the plans, if any, the Government may have to introduce a tax on the excessive consumption of non-renewable energy.

Mr. B. Ahern

I propose to take Questions Nos. 9, 41, 45 and 65 together.

Ireland has participationed actively in the Community discussions which have been held on the Commission's proposals for an EC carbon-energy tax. To date, Ministers in the Joint Energy-Environment and ECOFIN Councils have not been able to agree on the need, or otherwise, for a specific Community fiscal instrument as one of the measures to enable the achievement of the objective of stabilising CO² emissions in the Community at 1990 levels by the year 2000. Further discussions on the topic are likely to be held during the second half of the year.

It is incorrect to say that the Government is not supporting the Commission's proposal. From the outset, Ireland has adopted an open mind approach in the EC discussions. More recently, the Government agreed that we would be prepared to support the principle of the introduction of a carbon-energy tax provided certain concerns are satisfactorily addressed. These relate, in particular, to ensuring that any agreement takes account of the different levels of economic and social development in individual member states. While recognising and accepting the importance of environmental considerations, the Government is anxious to ensure that, to the extent feasible, the interests of existing Irish industries are protected and that our competitiveness as a location for investment is not undermined. These considerations will inform our stance in ongoing Community discussions. Deputies will also appreciate that because in many cases our taxation of energy products is already relatively high, the existing taxation regime is already supportive of environmental and energy conservation concerns.

Mr. Sargent

Does the Minister recall that during the debate in this House on the Green 2000 report the issue of an energy tax was discussed in the context of a reduction of tax on labour as part of an overall review of taxation and there was agreement by parties present as to the merits of an energy tax as one of the many measures needed to combat the climate change crisis, which in terms of the recent flooding has cost life as well as money? Given that the ESRI report referred to in the question indicates an increase of 9,000 jobs following the introduction of an energy tax and the EC strategy which the Government supposedly supports, was the Minister misquoted in speaking against the energy tax at the Council of Economic and Finance Ministers?

Mr. B. Ahern

This discussion has been ongoing for some time at the Environmental and Energy Councils and the ECOFIN Council. The whole basis of the discussion is that climate change in recent years has been identified as a global environmental problem of major significance. It is thought that the causes of this phenomenon lie principally in the greenhouse effect caused by gas emissions. One measure suggested is that Governments take action on manmade carbon dioxides, the burning of fossil fuels, coal, oil and turf. A proposal was made 18 months ago that a tax be introduced of US$3 per barrel, increasing to US$10 per barrel, in addition to an increase on existing excise on fuels. The ESRI surveys were based on that proposal, which would raise a substantial amount of money.

Basically Deputy Sargent's comment on the report is correct, but that is only one of several analyses made by the ESRI. The proposal quoted by Deputy Sargent was based on moneys raised from employers' PRSI and it was suggested it would reduce the cost of employment, thereby increasing the number of jobs created. IBEC and other studies undertaken by several private sector companies showed that there would be a decrease in growth and that in the area of peat production 4,000 jobs would be lost. Other cases were put forward by Aughinish Alumina, Premier Periclase, Irish Cement Limited and others.

At the discussions that took place I joined Ministers from other countries in supporting in principle a carbon tax, while putting forward the reservations of interested groups.

The Greeks have a lignite problem. Hydro-electricity is a problem for the Portuguese and we have a problem with regard to peat. We all put forward our arguments. Further studies are being undertaken. In principle we support the proposal but like practically every other State we have some reservation and we want to see some derogations and exceptions. We want to come to early conclusions on the tax. We have put forward our views and look forward to discussions continuing under the Belgian Presidency.

Mr. Sargent

Discussions will not combat the greenhouse effect. Will the Minister indicate even one step he has taken apart from further consideration and reservations, to indicate our genuine commitment? Ireland is far more prolific in its CO2 emissions than many other countries. From what the Minister has said it appears that our commitment is far from genuine.

Mr. B. Ahern

We said that we would go along with the proposal if the Community made progress in four areas. We want a provision whereby the EC carbon tax will be modulated by the cohesion States, to our relative advantage. We want a satisfactory provision regarding the impact of tax on the peat sector. We want effective conditionality clauses to maintain the competitiveness of the EC generally. A number of our biggest firms employing a great number of people argued that we should take these views into account. We are not particularly concerned that these industries could move to non-EC countries unaffected by the carbon tax and that we would achieve nothing. A lot of this is conditional on Japan and the US implementing the same kind of regulations as those in Europe. If they did not, the so-called dirty industries would move around the globe and we could do nothing about CO2 emissions. We also want an effective provision to maintain the competitiveness of energy-intensive firms that face competition from non-EC firms. Those requests were reasonable enough. Other countries have far greater reservations. If those provisions were implemented we would accept the proposal. We had bilateral discussions with the Danish Presidency and now it has been agreed that discussions will continue with the Belgian Presidency. Quite recently 11 countries indicated their support in principle without too many reservations. The matter is progressing.

Mr. Sargent

I would remind the Minister that it is not the major dirty industries that are responsible for the greenhouse effect but mainly motorised transport which will not move around the globe as the Minister suggests. Would the Minister make some specific recommendation in relation to this country? Motorised transport has to be tackled, rather than international companies?

Mr. B. Ahern

We did not raise the problems of tax in that area. What we are concerned with here is the negative effect it could have on employment.