Dáil Éireann Debate, Wednesday - 13 May 2020
107. Deputy Mattie McGrath asked the Minister for Finance if the carbon tax which was due to increase in May 2020 will be postponed in order to alleviate the financial burden on persons in view of current circumstances. [5443/20]
Amharc ar fhreagraThe Deputy will be aware that the increase in the carbon tax for non auto fuels took place on the 1st of May as was legislated for in the Finance Act 2019. Set out below is some relevant context to and rationale for this decision.
In my Budget 2020 financial statement I announced an increase to the rate of carbon tax from €20 to €26 per tonne of carbon dioxide emissions. This is the first increase to the carbon tax rate since 2012. My decision to increase the rate followed an examination of all relevant factors including the impact on households and is an important part of the Government’s commitment to tackling climate change.
The impact on the most commonly used household fuel bundles is set out in the following table:
|
Fuel Type |
Typical Fuel Bundle |
Carbon tax at €20 (incl VAT) |
Carbon Tax at €26 (incl VAT) |
Impact of Increase (incl VAT) |
|
Petrol |
60 litre fill |
€3.39 |
€4.42 |
€1.03 |
|
Diesel |
60 litre fill |
€3.93 |
€5.11 |
€1.18 |
|
Kerosene |
900 litre fill |
€51.82 |
€67.15 |
€15.33 |
|
Peat |
12.5kg bale |
€0.52 |
€0.68 |
€0.16 |
|
Coal |
40 kg bag |
€2.39 |
€3.11 |
€0.72 |
|
Natural Gas* |
11,000 kwh annual consumption |
€46.19 |
€58.80 |
€12.61 |
*Data from the Commission for Regulation of Utilities, Water and Energy (“CRU”) shows that the average household consumption of natural gas per annum is 11,000 MWh.
The recommendations of the Joint Oireachtas Committee on Climate Action and the 2019 Climate Action Plan to increase the rate of carbon tax to €80 per tonne of emission by 2030 received cross-party support. Instead of a larger increase in any one year, the Government committed to a €6 increase as a first step towards the 2030 target. In order to ease in the increase I decided to delay the commencement of the increase for marked gas oil and home heating fuels until 1 May 2020, a time of the year when home heating requirements are low.
In Budget 2020, I also made provision for ringfencing all additional revenue arising from carbon tax increases. At this point it was estimated that the €6 increase would provide additional revenue of some €90 million in 2020 which has been allocated for expenditure on measures related to climate action, protecting the vulnerable and the Just Transition. Some €34 million was allocated to protecting those most vulnerable to fuel poverty by increasing the national fuel allowance payment and providing increased funding for energy efficiency upgrades.
Analysis conducted by the Department of Finance (A distributional analysis of Budget 2020 Tax and Welfare measures ) using the ESRI SWITCH microsimulation model, confirms that households in the bottom three income deciles will experience a net positive impact in their equivalised disposable income as a result of the changes introduced in Budget 2020 when account is taken of the increase in carbon tax, the increase in fuel allowance and the range of other welfare measures announced. In particular, the analysis finds that any regressive impact of the carbon tax is outweighed by the increase in social welfare transfers and direct tax measures, even before the fuller benefits of the announced carbon tax revenue recycling are accounted for.
Further, whereas the carbon tax increase for home heating fuels applies from 1 May 2020, the increase of €2 per week in the national fuel allowance applied from 6 January 2020. In order to ensure the most vulnerable groups are provided with additional targeted financial supports in a timely and efficient manner, Minister Doherty and I recently announced that the term of this scheme is to be extended by 4 weeks until 8 May (as a one-off measure). I am acutely aware of the financial uncertainty and strain that many households and businesses are facing as a result of the restrictions in place to limit the spread of Covid19. In order to alleviate this pressure the Government implemented a series of supports including emergency welfare payments, a wage subsidy scheme as well as a major expansion of supports in liquidity measures for businesses affected by Covid19.
As I have outlined, the impact of the carbon tax increase on a typical fuel bundle is moderate and financial supports are in place to protect those most exposed to fuel poverty as well as businesses who are impacted by Covid19.
