Recommendation No. 5 calls for a report on carbon pricing and carbon levies, outlining how the Government intends to apply the aforementioned principle between individuals and corporations, and the potential implications of such pricing and levies as regards costs associated with EU emission reduction commitments and future liabilities under investment protection schemes.
The United Nations Framework Convention on Climate Change, UNFCCC, principle of common but differentiated responsibility acknowledges that the global nature of climate change calls for the widest possible co-operation of all countries in an effective and appropriate international response, in accordance with the common but differentiated responsibilities and capabilities of individual nations.
Climate change is a global issue and the need to act collaboratively to face this challenge is recognised on an international scale. Reflecting our commitment to addressing this global challenge, Ireland is a party to the United Nations Framework Convention on Climate Change and the Paris Agreement, which together provide the international legal framework for addressing climate change. As a member of the EU, Ireland also participates in the EU emissions trading system, an essential tool for reducing greenhouse gas emissions. Ireland also committed to reaching national targets for reducing our greenhouse gas emissions under the EU effort sharing decision and EU effort sharing regulation.
The Minister for Finance is also a member of the global coalition of finance ministers for climate action. Additionally, the Central Bank of Ireland has joined more than 30 other central banks as a member of the network for greening the financial system.
In November 2020, the Government welcomed the adoption of the task force on climate-related financial disclosures by those corporate entities which are already engaged with the task force. We are further actively encouraging greater uptake as more Irish firms look to accelerate and scale their own climate transition plans.
Addressing the threat of climate change is a priority for this Government as is reflected in the programme for Government. As one of the most significant challenges facing the country, it is a whole-of-government and societal issue that requires a joined-up effort.
Getting carbon pricing right encourages businesses and people to do what is right for the environment while leaving the choice of how they do so to them. It makes each of us responsible for our share of the problem and rewards those who pollute the least. It is not, nor will it ever be, the primary Government response to fighting climate change but it is a vital part of a package of policies and measures, each of which will make some contribution towards our climate targets.
The current carbon tax policy of incremental annual increases has cross-party support and has been advocated for by the Climate Change Advisory Council, the Citizens' Assembly on climate change and the Oireachtas Joint Committee on Climate Action, among others. As recommended in the programme for Government, this policy has been informed by evidence-based research completed by the Economic and Social Research Institute. The Government will continue to be informed by up-to-date research in this field and is fully committed to this policy, which forms a core part of our efforts to combat climate change.
Accordingly, I cannot accept the Senator's recommendation. I have outlined all the international bodies involved in this. Much of the Senator's contribution related to asking why we cannot tax the companies responsible for fossil fuel production and sale. In Ireland we can only pass finance legislation that is relevant to Ireland. A number of the cases the Senator mentioned relate to companies that are not in Ireland taking other jurisdictions to court on various issues. Regarding what is relevant to Ireland, Ireland is almost entirely dependent on imported fossil fuels. This leaves us with very little ability to tax the production of the majority of fossil fuels we consume. We are in an unusual situation in that we are not independent in respect of our fuel sources. In the main, Ireland is dependent on imported fossil fuels. The idea of taxing production of fossil fuels does not arise to a great extent in Ireland.
Companies involved in the oil and gas production sector in Ireland already face a double rate of corporation tax at 25%. I know everybody is familiar with the 12.5% rate but some corporations do not qualify for the 12.5% rate. They already pay corporation tax at 25% in addition to the petroleum production tax for which a minimum rate of 5% applies. Therefore, those in the oil and gas production sector pay corporation tax of 30% or more. This means they are contributing if they produce it. I believe that is substantially dealt with by that high rate of tax relative to the main rate of corporation tax at 12.5%.
The only other domestically produced fossil fuel is peat. It was either produced by individuals for private consumption or by Bord na Móna, which is already committed to cease peat production by 2028. Along with Bord na Móna, some private individuals may harvest from bogs for their own domestic purposes, which is not extensive but there is an element of it.
If the new tax is applied to the companies involved in the sale of fossil fuels in Ireland, the cost of such taxes would simply be passed on to consumers at the pump. As we are importing the fossil fuels and because it is not being produced here in most cases, if the companies which sell it on to Irish people are to be taxed, there is only one way that goes: it will be passed on to the customer.
Certain sectors, which do not pay carbon tax, such as those involved in electricity generation, aviation and certain energy-intensive industries, such as steelworks, cement etc., come under the scope of the EU emissions trading system and therefore carbon pricing is incorporated into these industries separately from the carbon tax. The current price of the EU carbon allowance permit is approximately €25 per tonne of CO2 produced. We have the situation the Senator is referring to. Very few of the companies that produce the fossil fuels are in Ireland to start with so I do not know who will be taxed by the tax. Some involved in the gas production sector would be taxed. Those in that sector are already taxed at 30%, which by a long way is the highest rate of corporation tax payable by any business sector in the Irish economy.
That is compared with those on a maximum rate of 12.5% and against which some people have allowances that can be offset. The only other producer of fossil fuel in Ireland is Bord na Móna, which is to cease production.
There are other "large polluters", although they are not producers of fossil fuel. They create substantial CO2 emissions. As Members know well, there is a separate mechanism at the EU level to deal with all these major companies. I might have mentioned it here the last day or some previous day but it takes in approximately 100 of these large companies in Ireland. It is a publicly available list and the Environmental Protection Agency is involved. They have licences for CO2 emissions and if they need to exceed the limit, which they should not, they can get more of an allowance through the emissions trading system and will be paying a rate of €25 per tonne of CO2 in order to continue operating plants. There has not been much emissions trading in that system recently and there is a high tax on it, albeit separate from the carbon tax. That happens if companies exceed permitted limits for CO2 emissions and there are not many cases of that. There might be some but the overwhelming majority, if not almost all, of those 100 or so companies come within those limits.
Applying carbon taxes to aviation and shipping can only be done at EU level due to carbon leakage. Put simply, if Ireland imposed a tax on shipping or aviation fuel, the providers of these services would simply choose not to refuel in Ireland. That is a simple fact of life. The aviation industry in particular is gradually being brought under the remit of the EU emissions trading system and companies will be caught at an EU level, with the price of the CO2 emissions to be determined. That price of carbon emissions from the sector will be applied at an EU level and this will not just be an Irish matter, although Ireland will be involved.
In a nutshell, there are very few producers of fossil fuels in the country. This is an international debate and because of our circumstances, there is not as much of a heavy concentration in Ireland in any event. Producers in the oil and gas industry here are paying a very high level of tax, like the Senator is seeking. It is already happening. Those not in the system pay for their emissions through the emissions trading system at EU level as well. The only other company that is in the production of fossil fuels currently is Bord na Móna and it is getting out of the activity.
All in all, the Senator's comments are interesting but this does not have as much application in Ireland as one might have thought. On that basis, it is not necessary to have this report. If a very large part of the Irish economy was involved in this area of production of fossil fuels, it is something we would address in general and not just through this Finance Bill. The various committees of the House and the Departments would deal with it in any event. It is not an issue of the same scale as it is in other countries. I am not in a position to accept the proposal.