Announcement and political reaction: The Minister for Finance, Mr McCreevy, has confirmed that the Government has abandoned plans to introduce a carbon tax on the grounds that it would be ineffective at curbing emissions.
Speaking in the Dutch seaside town of Scheveningen, where he is attending a meeting of EU finance ministers, Mr McCreevy said that introducing such a tax would have only a marginal effect on consumption of carbon fuels.
"We concluded at a Cabinet meeting on Wednesday that going ahead with the carbon tax just wasn't worth it. It is abandoned," he said.
Mr McCreevy said most of the interested parties that had made submissions to the Government on carbon tax were either fully or partially opposed to the proposal. He added that the modest tax envisaged would have little impact on the Exchequer and would not dissuade consumers from using carbon fuels.
"To have an effect, you would have to have a colossal increase in levels of taxation . . . It was going to be an enormous amount of bureaucracy for very little effect," he said.
Opposition parties have accused the Government of having no strategy to meet its emissions targets under the Kyoto protocol, thus exposing the State to massive fines for breaching the international environmental agreement.
Fine Gael's environment spokesman Mr Bernard Allen yesterday challenged the Minister for the Environment, Mr Cullen, to explain how the Government could meet its commitments under the Kyoto protocol following the decision to abandon the carbon tax.
The carbon tax had been a cornerstone of the Government's climate change strategy, he said. Meeting the Kyoto targets will involve reducing carbon emissions by nine million tonnes a year. Studies had estimated that the carbon tax would have achieved a reduction of 0.5 to 0.75 million tonnes per year.
Fine Gael has not stated its position on whether or not a carbon tax should be part of the climate change strategy, but says that if there is to be such a tax, it should not add to the total tax burden on business.
Mr Allen warned yesterday that a failure to meet Ireland's Kyoto targets would expose the taxpayer to heavy penalties. "If agreed commitments on emissions are not met, Ireland will have to pay fines of up to €1.45 billioby 2008 and up to €4.3 billion by 2012. This is equivalent to over €1,000 per annum for every man, woman and child in Ireland."
He called on the Government to publish the detailed analysis it said it had carried out to allow for an informed debate.
Labour's finance spokeswoman Ms Joan Burton said the abandonment of the carbon tax plan "leaves Irish taxpayers potentially open to a huge bill because of the Government's failure to adopt a climate change strategy in line with the international commitments it has signed up to under the Kyoto protocol and Ireland's associated agreements with its fellow EU states." She claimed Ireland now had no strategy for dealing with CO2 emissions. "After seven years of discussion and endless foot-dragging, the Government has today run away from the consequences of climate change," she said.
She said the Government's own projections showed that Ireland would miss its agreed legal targets for greenhouse gas emissions.
Ms Burton said that global warming and the national climate strategy "is one more example of how this FF/PD Government is either unwilling or unable to provide the Government that Ireland needs".
The Green Party, an enthusiastic supporter of a carbon tax, also warned that the decision could impose a substantial financial burden on the taxpayer.
The party's finance spokesman, Mr Dan Boyle, said the Government was "deliberately ignoring the recommendations of a recent ESRI report, which concluded that a carbon tax could have a positive effect on the economy".
He said the ESRI recommended that the extra revenue generated by a carbon tax should go towards reducing income tax and VAT, increasing social welfare payments, and using additional funds to improve infrastructure that will improve environmental behaviour.
"This is a Government which is abandoning its environmental responsibilities. Under international treaties, Ireland has committed to keeping our greenhouse emissions to 1990 levels plus 13 per cent, but Ireland is currently at 225 per cent of the levels it has promised to meet under the Kyoto Protocol, according to the latest figures from the Central Statistics Office."