Environmental tax could have negative impact, writes Tim O'Brien
A CARBON TAX in next week’s Budget which is set to add about four cent to the price of a litre of petrol may be the thin end of the wedge, with a similar French scheme promising to rise by more than five-fold over the next 20 years.
The Government has committed itself to a carbon tax in the 2010 budget, the details of which are to be announced by Minister for Finance Brian Lenihan on December 9th. But informed sources have told The Irish Times the Government has calculated that a tax of €15 per tonne on carbon emissions, would result in an increase in the price of petrol in the order of four cent per litre on vehicle fuels.
However, the introduction of the tax comes as one of Europe’s foremost experts on environmental tax reforms warned such a tax, if introduced simply as new revenue stream for the Exchequer, would be “anti-competitive” and a burden on industry.
Professor of energy and environmental policy at University College London Paul Ekins, who reviewed carbon taxes in Denmark, Finland, Germany, the Netherlands, Sweden and the UK, defined environmental tax reform as “a shift in taxes from labour and profits and on to pollution and resources”.
“Obviously if all you are doing is sticking on extra taxes on to business you would expect competitiveness to be negatively affected,” said Prof Ekins whose publication Carbon Energy Taxation – the European Experience, was launched by the Institute for International and European Affairs in Dublin last month.
Prof Ekins also revealed Anglo-German proposals were being formulated for an EU-wide approach to environmental tax reforms and he said the French were proposing to introduce a scheme which would start the tax at a level of about €17 per tonne of carbon emission, but which would rise to €100 per tonne by 2030.
But he stressed environmental tax reforms must have “as their primary aim” the goal of reducing greenhouse gas emissions, not of making economies more efficient. “Any attempt to think you are introducing this to increase the efficiency of the economy is likely to be misguided,” he warned.
He added that he didn’t know whether Ireland’s proposed tax would fit in with his definition of a revenue neutral, environmental tax reform (ETR), “but I suspect not, given the levels of public deficits in most countries at the moment”.
A spokesman for Minister for the Environment John Gormley said it was intended the money raised by the proposed tax would be “ring-fenced” for funding environmental measures elsewhere, as was the plastic bag and landfill levies. The spokesman said the tax, which would also affect home heating oil, coal and turf, would bring mitigating measures for those on social welfare or low incomes.
However, the Irish Road Haulage Association has accused the Government of “missing the point” and claimed the aim “appears to be motivated more by a desire to create a new mechanism for collecting tax than by any genuine commitment to reducing the levels of carbon emissions”. The association said it would be watching the Budget to see if it contained any measure to allow members to pass on the tax to clients.
Chief executive of the Chartered Institute of Logistics and Transport Colm Holmes said the institute would like to see “a more sophisticated form of carbon tax” which would be based on the necessity for vehicle usage.
Such a scheme would charge heavily for use of private cars where there was public transport, but impose low taxes where there was no alternative to the private car. The organisation could see how much easier it would be for the Government to impose a flat four or five cent charge across the board, but was concerned about the effect on logistics, haulage and transport.