In the 2002 budget the Minister for Finance, Deputy McCreevy, announced that in the context of Ireland's Kyoto obligations he was proposing to introduce an energy tax, or carbon taxes, of some kind, effective from this year's budget, and becoming operational in 2004. The working papers from the tax strategy group and others suggested that these taxes would take the form of an increase in the rate of taxation on fossil fuels and the more polluting the fossil fuel the higher the rate of additional taxation to be applied. The examples given in the various papers mean that there would be significant increases in briquette prices, followed by coal and oil, with gas as the least polluting fuel.
I have argued many times with the European Union's mantra, the polluter pays, and the way the Government has adopted it. I do not completely disagree with it but the philosophy now being applied bothers me. If one applies the polluter pays principle one seems to let go of any obligation either to reduce significantly or eliminate the pollution. The polluter pays principle is a handy way for governments to raise additional moneys, whether by way of service charges or by taxation. We will not go into the area of service charges now for obvious reasons, and no doubt to the relief of everybody here.
I have several concerns about the schedule of possible actions laid out in keeping with the budget. Am I correct in saying that the aim was to increase taxation on fossil fuels and that the greater the pollutant the higher the level of tax which would apply? This committee's submission to the Department of Finance might cover the impact of this on different ranges of industry, on small and medium sized enterprises and on individual households. If the effect of the carbon taxes is higher on briquette and coal prices the greatest impact will be on people receiving social welfare incomes, particularly elderly people living alone and outside the schemes for gas central heating.
The Department of Social and Family Affairs has already said that if the Department of Finance proceeds with this regime it is not in favour for instance of reducing taxes on employment, such as PRSI, to compensate households for their increased fuel costs. It would favour, as would others, schemes whereby additional insulation measures are given to poorer households and more efficient heating systems are installed. In the context of the Exchequer figures issued at the end of August, there is a large hole appearing in the ozone layer of Government finances which will probably be filled up this year by a donation of €500 million to €1 billion from the National Treasury Management Agency. Next year, with the fall in income tax receipts, the hole in the Exchequer's ozone layer cannot be covered by any other measures. The Minister may see carbon taxes as a way of rescuing the Government's finances in a small way this year but more particularly next year. This committee should be discussing whether the tax is proposed for environmental reasons.
In all the documents circulated by the various Departments, from reducing farting cows to everything else, there seems to be a consensus from Government that this is the correct road to take in terms of the Kyoto proposals and obligations. How do we do this in a way that is fair, particularly to poorer households? How do we do in a way that reduces the pollution rather than simply pays for it? How do we come up with imaginative schemes for pollution reduction? We saw what Mr. Livingston did as Mayor of London regarding congestion charges and reducing vehicle emissions in the centre of London. In Ireland we have seen the enormous positive response to the plastic bag tax. What is the budget strategy and how does it marry with the environmental one? What will be the impact on poor households and small businesses? What imaginative ideas have been drawn up so we can use taxation to reduce pollution as opposed to paying for it?
I endorse Deputy Ó Caoláin's remarks on emissions trading. I notice from the latest IBEC bulletin that they seem to be fine about all of this because they are happy that trading permits will get most of the big industries out of the problem. That does not address how we make the tax system more directed to reducing pollution as opposed to paying for it.