The Carbon tax Ireland 2020: How much is too much?

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What is the carbon tax and how does it work?

A carbon tax is a tax applied to fossil fuels which emit carbon particles such as carbon dioxide. Carbon dioxide, or CO2, is one of the main culprits behind global warming, trapping heat reflected by this greenhouse gas in the Earth’s upper atmosphere.

The theory behind a carbon tax is that levying charges against users of carbon-emitting fuels will:

  1. Act as a financial disincentive to using fossil fuels as an energy source.
  2. Encourage uptake of renewable energy.
  3. Provide financing for offsetting CO2 emissions and investing in renewable technology.

The carbon tax has been a source of controversy in some countries where it has been implemented, with citizens and representatives calling on the government to tax the large corporations responsible for carbon pollution instead of the people.

How is carbon dioxide contributing to global warming?

Combusting fossil fuels not only releases heat, but it also converts the carbon present in those fuels to carbon dioxide, which is then released into the Earth’s atmosphere. Carbon dioxide emissions can remain in the upper atmosphere for approximately a century, and trap heat emitted from the Earth’s surface. 

It is this process which is responsible for global warming and climate change. While one might think that in Ireland, with our inclement climate, we would welcome a hike in temperatures, the consequences for Ireland, and the world, could be serious if action is not taken.

What could happen if we don’t cut down on our carbon emissions?

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Air samples taken from ice cores show that over a period of 800,000 years, the amount of CO2 in the atmosphere was 300ppm (parts per million) at its highest point. Today, the concentration of CO2 in our atmosphere is at 415ppm and rising rapidly.

As a society, we have become increasingly dependent on processes which release carbon, and unfortunately, the road to reducing our greenhouse gas emissions could have an additional cost in terms of lost income and harm to the economy as some lucrative sectors will be heavily impacted (such as agriculture).

However, there is no longer any doubt of the severe consequences to be faced if an effort is not made to get greenhouse gases under control, of which carbon dioxide is the main culprit. The heat generated by soaring levels of CO2 is being absorbed by the oceans and as their temperatures rise and the polar caps melt, sea levels are rising and coastlines are eroding.

The melting of the ice caps and thawing of underwater sediment is also releasing large amounts of methane into the atmosphere, adding to existing greenhouse gases and speeding up global warming.

Which items is carbon tax paid on?

In Ireland, the carbon tax is currently payable on coal, diesel, peat, petrol and natural gas and is levied at €20 per tonne of CO2 produced. 

How much is the carbon tax in Ireland?

Gas providers in Ireland charge an extra €46.20 a year, or €7.70 a month. This is to cover the Irish average consumption of 11,000 kWh of gas per household annually. Our article on understanding your utility bill should clarify any further queries you have about the items listed on your gas bill. 

The charge for coal comes in at about €2.10 extra per 40kg bag. Peat briquettes are charged at 45 cent extra per bale. 

For those who drive, the carbon tax adds approximately 5 cent to every litre of petrol and diesel.

All these charges raise over €400 million a year for the Irish government.

Timeline of the carbon tax in Ireland

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In Ireland, the carbon tax was first introduced in the 2010 budget at €15 per ton of CO2. It was then increased in the 2012 budget to €20 per tonne, however, up until 2013 it was not applied to solid fuels. 

In May 2013 a €10 carbon tax was added to solid fuels, which was then increased to €20 in 2014 to match other taxed fuels. Since then there has been no increase in the carbon tax, although environmental groups have expressed disappointment at the lack of an increase. A hike of at least €10 is heavily hinted at for the 2020 budget.

Carbon tax in the Irish news

The carbon tax has become a polemic issue in Ireland, with environmental advocates calling for an increase in it, and groups representing the more vulnerable members of society calling for reductions or abolishment

With the ever-increasing costs of already-expensive home heating fuels, further pressure on people’s wallets via this tax means it is certainly unpopular.

Recent reports have indicated the government is considering increasing the carbon tax by €10 in the 2020 budget. Recommendations in the Government’s Climate Action Plan then point to further increases until the carbon tax reaches €80 per tonne of CO2 by 2030, the next emissions reduction target deadline in the Paris agreement.

Clarity and communication over what the government intends to do with the vast amount of money the carbon tax will raise will be crucial to public acceptance. One would expect the bulk of the money to be used for carbon offsetting (article coming soon) and reforesting.

Equally important is negating the impact of the tax on more vulnerable members of Irish society and ensuring access to reasonably priced heating for all.

Fuel poverty

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Government ministers against increases in the level of the carbon tax levied have cited fuel poverty as one of the main reasons for stabilising or decreasing the tax.

Ahead of the 2019-2020 budget announcements in September 2019, TDs such as Bríd Smith, have called upon the government to explore alternatives such as an increase in taxation on the profits of companies which provide oil and gas. 

Former TD Denis Naughten suggested that reducing electricity costs would encourage the public to invest in renewable electric heating systems. It is currently much more expensive to heat your home with electricity than gas, but Mr Naughten’s proposal could warrant consideration in the future. 

The construction of the Celtic Interconnector, which will supply Ireland with electricity from France, is scheduled to finish in 2025 and could open up the expensive Irish electricity market to downward pressure on pricing.

In the meantime, Irish homeowners could also make use of one of the SEAI’s home energy grants to upgrade to a more efficient home heating system or make improvements in their home to reduce their heating expenditure.

As always, the easiest and fastest way to make the most significant savings on your home energy bills is by switching providers every 12 months.

The carbon tax and your wallet

Ahead of the likelihood that the carbon tax will be increased by 50% (an additional €10 per tonne of carbon dioxide) in 2020, how much of a hit will Irish citizens’ pockets have to take?

A carbon tax of €30 per tonne of CO2 would mean adding on the following amounts to existing carbon tax charges:

  • Between 2-3 cent per litre of petrol or diesel
  • €23 a year to natural gas bills
  • €1.05 for a bag of coal (40kg)
  • €0.22 on a bale of peat briquettes
  • €10 on a tank of oil

This would bring the total amount of carbon tax on solid and liquid fossil fuel to:

  • 7 - 8 cent per litre of petrol or diesel
  • €69.30 a year to natural gas bills
  • €3.15 for a 40kg bag of coal
  • €0.67 on a bale of peat briquettes
  • €30 on a tank of oil
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