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Economic and Social Research Institute

Dáil Éireann Debate, Wednesday - 20 October 2021

Wednesday, 20 October 2021

Questions (71, 72)

Darren O'Rourke

Question:

71. Deputy Darren O'Rourke asked the Minister for the Environment, Climate and Communications his views on the Economic and Social Research Institute report entitled Carbon taxes, poverty and compensation options, 2020 cited by the Department of Public Expenditure and Reform as proof that carbon tax increases leave the lowest income fifth of households on average better off and reduces poverty, fails to take into account the huge increase in energy prices since its publication; and if he will make a statement on the matter. [51563/21]

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Darren O'Rourke

Question:

72. Deputy Darren O'Rourke asked the Minister for the Environment, Climate and Communications if his attention has been drawn to the ESRI report entitled Carbon Taxes, Poverty and Compensation Options, 2020 cited by his Department as proof that carbon tax increases leaves the lowest income fifth of households on average better off and reduces poverty, does not accurately measure energy poverty, due to the fact that the Government failed to act on a recommendation from their own 2016 Strategy to Combat Energy Poverty, calling for an appropriate methodology for measuring and tracking energy poverty levels across the State to be designed, which means no appropriate methodology currently exists; and if he will make a statement on the matter. [51565/21]

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Written answers

I propose to take Questions Nos. 71 and 72 together. I propose to take Questions Nos  71 and  72 together.

The carbon tax is one of many policies in place that are aimed at reducing greenhouse gas emissions.  The Oireachtas has legislated, through the 2020 Finance Act, to progressively increase the rate of carbon tax each year so that it will reach a rate of €100 per tonne of carbon dioxide emissions by 2030. The increase in the rate by €7.50 in Budget 2022 brings the overall rate to €41 per tonne. The increase applied from 13 October 2021 for diesel and petrol, and will apply from 1 May 2022 for all other fuels to allow for the winter heating season.

A predictable schedule of carbon tax increases, in conjunction with other measures such as investment in active mobility and energy efficiency measures, and a progressive replacement of the private car fleet to electric vehicles, will allow households and businesses to plan for increases in carbon tax and, over time, this will change consumption and investment decisions.

On foot of a commitment in the Programme for Government, the ESRI published a report entitled, "Carbon taxes, poverty and compensation options," on 13 October 2020. The report identified a series of targeted direct social protection payment interventions that could be used to address the effects an increase in the price of fossil fuels would have on lower income households and examined the effect of each of these. This report subsequently informed the introduction of a number of social welfare measures in Budget 2021 designed to mitigate the impact of increasing the rates of carbon tax on lower income households.

This year’s carbon tax increase was again accompanied by a series of parallel measures, introduced by the Minister for Social Protection in Budget 2022, intended to assist low-income households:

- an increase to the Qualified Child Payment of €2 per week for children under 12, and €3 per week for children over 12;

- an increase in the Living Alone Allowance of €3 per week;

- an increase to the Fuel Allowance of €5 per week; and

- an increase in the income threshold for the Working Family Payment of €10 per week.

My Department defines energy poverty as an inability to heat or power a home to an adequate degree. It is currently measured as a requirement to spend more than 10% of a household’s income on energy needs, which is an accepted and recognised method of assessing the likely level of energy poverty. The ESRI carried out an analysis of the number of households at risk of experiencing energy poverty in 2019 and again in 2020. This showed that the share of households needing to spend more than 10% of their income on their energy needs was 17.5% in 2020.

While the ESRI report referred to above updates the measurement of energy poverty to 2020 levels, it did not specifically link this measurement to a proposed approach for the redistribution of carbon tax revenues. Instead the report noted that, due to difficulties with measuring energy poverty with accuracy, there is a compelling case for focusing on the net impact of any rise in the carbon tax on more established measures of poverty, such as the official at risk-of-poverty rate. The report shows that by doing this it is possible to raise the carbon tax while reducing poverty in general. It is important to note that the ESRI has also previously found that energy poverty and poverty in general are closely linked in Ireland and, that by targeting supports towards those at risk of poverty, it is likely that those in energy poverty are also supported. In line with this, Government supports for those at risk of energy poverty focus on both income supports and energy efficiency upgrades. Free energy efficiency upgrades are only available to those in receipt of certain welfare payments and those living in social housing, meaning that the support is targeted to lower income households. A review of the implementation of the Strategy to Combat Energy Poverty will be completed this year and will inform next steps in relation to the development of a new strategy.

Question No. 72 answered with Question No. 71.
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