As part of a joint research programme between the Department of Finance, the Revenue Commissioners and the Economic and Social Research Institute (ESRI), the ESRI published research on the impacts of increases in the carbon tax, including distributional impacts. This research paper can be accessed at: https://www.esri.ie/publications/the-economic-and-environmental-impacts-of-increasing-the-irish-carbon-tax.
In June 2019, the ESRI published a special article, Carbon taxation in Ireland: Distributional effects of revenue recycling policies. This special article examined the distributional effects of increases in the carbon tax for urban and rural households as well as the distributional effects of different revenue recycling mechanisms.
This article can be accessed at: https://www.esri.ie/news/a-well-designed-carbon-tax-could-reduce-emissions-and-alleviate-income-inequality.
I recognise that the research points to carbon tax increases disproportionately impacting low income and rural households. In order to minimise the impact of the increase on heating costs, I have delayed the increase on home heating fuels until 1st May 2020. I am also increasing the fuel allowance by €2 per week. This increase applies from the first of January 2020 and means an annual increase of €56 to each household. Based on the findings from the aforementioned ESRI research, this will leave the 370,000 households who are in receipt of the fuel allowance better off than before the increase in the carbon tax. This ensures that the most vulnerable in society are protected from the increased carbon tax.
Alongside this I am providing increases to programmes that help to address the causes of fuel poverty. The Warmer Homes scheme provides free energy efficiency upgrades to households deemed to be in or at risk of energy poverty. This reduces the energy required to heat a home adequately, thus reducing a household’s exposure to increases in energy costs. This will be more effective in the long run at reducing heating costs than increases in the fuel allowance. An extra €13m will be provided for this scheme in 2020, bringing its total budget allocation for the year to over €50m.
These measures will help to protect the most vulnerable in society from the impact of the carbon tax increases in the short, medium and long term.