The proposed introduction of carbon tax is in response to our international obligations under the Kyoto Protocol to reduce greenhouse gas emissions. Taxation is one of a number of measures included in the national climate change strategy, which sets out a framework of mechanisms to help Ireland to meet this international commitment. While the introduction of a general carbon tax from the end of 2004 was signalled by the Minister for Finance in his budget speech last December, I should mention that the tax framework has not yet been developed. The Minister made it clear that given the many implications of such a tax, both environmental and economic, there will be full consul tation with interested parties on the design of the tax. This commitment to consultation is reiterated in the draft social partnership agreement, Sustaining Progress, which states: "In keeping with Ireland's obligation under the Kyoto Protocol to reduce greenhouse gas emissions and the announcement in the budget regarding the development of a general carbon tax, there will be full consultation with the social partners, having regard to the potential implications for jobs, competitiveness and social inclusion."
I expect the Minister for Finance will initiate consultations to develop a framework for the tax shortly. My Department will be fully involved in the development process, where important issues for discussion are likely to include the level at which the tax will be set, the question of exemptions or reductions for companies engaged in other greenhouse gas reduction measures such as emissions trading, negotiated agreements and the question of recycling the tax. In developing the tax framework, a crucial consideration will be minimisation of any impact on competitiveness.