I have been in discussion with fuel merchants in my constituency and beyond who are being adversely affected by fuel smuggling from the North. The fuel merchants I have spoken to employ people. They pay PRSI and their taxes, including carbon tax and VAT. They also enforce the smokeless fuel laws. However, they cannot compete with the selling of smoky fuel from the North, mainly due to the continually rising carbon taxes. The fuel merchants I have spoken to broadly welcome the recent announcement by the Minister for the Environment, Climate and Communications, Deputy Eamon Ryan, to introduce a nationwide ban on smoky coal from next year and implement regulations designed to curb air pollution and its impact on public health. The proposed legislation will see smoke emission rates for manufactured solid fuel coal and coal-based products reduced and permitted sulphur content also reduced over time.
In order for these laws to be effective, the widespread selling of fuels mislabelled as low smoke has to be stopped. In addition, the 100,000 tonnes of coal coming in from the North every year cannot be permitted to continue. This coal has a retail value of approximately €56 million per annum. The main reason this is happening is that solid fuel in the North has a VAT rate of 5% compared with the 13.5% rate applied in the rest of Ireland. Also in the North, carbon tax is 0% whereas at present in the South the carbon tax on 1 tonne of coal is €87. This is set to increase to €107 per tonne next year and €126 per tonne the year after that, with further annual increases until 2030.
Based on the current rate of carbon tax, the €56 million worth of smuggled coal per annum represents a loss in VAT of more than €7.5 million and a loss in carbon tax of €8.7 million. This is a total of more than €16 million lost to the State. It also represents a loss of almost €40 million to the retailers. Based on the carbon tax rate from 2021 to 2025, if this continues the State will incur a further loss of €130 million and the loss to the retailers will be €188 million.
The issue is that there is little or no enforcement on the sale of fuel. There is no checking of mislabelling of goods. There are no efforts to curtail smuggling. The proposed nationwide ban on smoky coal is being introduced to improve our air quality. Without a dedicated task force to look at this issue and enforce the proper labelling of goods and the sale of smokeless fuel only, our air quality will not improve and, therefore, the health of our people will continue to be impacted negatively. There needs to be more education for the consumer on the health and environmental impact of smoky coal. There are also need to be fines for merchants caught trading in smoky coal and mislabelling products.
What we have is a significant loss of revenue to the State in VAT and carbon taxes. We have fuel retailers struggling to try to run legitimate businesses. They pay their taxes, pay wages to employees and pay PRSI. They are seeing their businesses going down the Swanee. It means that reaching our carbon targets becomes more difficult. It is contrary to the Government's objectives of the clean air strategy. The findings of the Ricardo report, which estimates the cost of burning smoky coal at €722 million, continue to apply. There needs to be proper monitoring and enforcement of the rules on the sale of solid fuel.