Taoiseach Leo Varadkar has expressed a desire to secure an all-party consensus on how to distribute carbon tax revenue to Irish householders.
Mr Varadkar said the tax was less about raising money and more about changing behaviour, so the Government wanted to find an appropriate way to pay it back to citizens.
While the Government did not raise the rate of carbon tax in the last budget, rises are expected in the coming years as Ireland strives to meet legally-binding targets on cutting greenhouse gas emissions.
It’s not designed to take money out of your pocketLeo Varadkar on carbon tax
The current tax on use of fossil fuels such as oil, petrol, diesel, gas, coal and peat is levied at 20 euro (£17) per tonne. Recent research by the Economic and Social Research Institute indicate a massive rise would be required in the next decade – to 300 euro (£269) per tonne – if Ireland is to meet its commitments to reducing CO2.
“I am of the view that carbon tax is there for a reason, it’s an environmental tax designed to change behaviour,” said the Taoiseach.
“It’s not designed to take money out of your pocket, that’s why I’m very much of the view that the money raised from carbon tax from households should be given back to households.”
Mr Varadkar said the Government was considering two models. The first would see people receive a direct payment, the second would deliver saving through the tax and benefits system.
“You can either give everyone a carbon cheque in the post; you can do that by individual or by household, and you get that upfront,” he explained.
“That’s designed to compensate you for the cost of the carbon. Those who use a lot of carbon don’t benefit as much, those who have low-carbon lifestyles benefit more.
“You can do it that way or you can do it through the tax and welfare system such as an increase in child benefit funded by the carbon tax or an increase in tax credits and welfare. We haven’t decided which to go for.
“I would like to get an all-party consensus around it, so what I propose to do is develop a proposal in the first two months of the New Year and put that out to the other parties to see if they are willing to be supportive of it.”
Mr Varadkar said if the tax rate was increased in this autumn’s budget consideration would be required on whether the move would come into effect immediately, or after the winter.
“On carbon tax, you would have to consider if you would bring it in on budget night, which you can do, or you might time it to come in later in the year due to winter costs,” he said.
“So you would have to consider that.”