Monday 14 October 2019

Donohoe admits hike in fuel costs could prompt protests as he denies levy 'just a cash grab'

Warning: Seamus Boland, CEO of Irish Rural Link, said the carbon tax would have a bigger impact on rural dwellers
Warning: Seamus Boland, CEO of Irish Rural Link, said the carbon tax would have a bigger impact on rural dwellers

Caroline O'Doherty

Finance Minister Paschal Donohoe has admitted the increase in carbon tax could lead to protests as he denied claims that the move amounted to a "cash grab".

The Government's first "green" Budget took immediate effect, with a €6 rise in carbon tax applying from midnight to petrol and diesel, adding about €1 to a 50-litre tank fill.

As queues were reported at some petrol stations ahead of the price hike, motorists signalled they cared more about the impact on their pockets than the reason for the tax.

The Irish Independent witnessed substantial queues at some petrol stations across north county Dublin, as drivers were determined to get the most fuel for their cash ahead of the midnight deadline.

Conor Faughnan, AA Ireland's director of consumer affairs, said the queues were far from a surprise.

"This underscores the importance of policies that will give people an actual affordable and green alternative," he said.

"Taxing people isn't an alternative to decentivising them away from diesel and petrol, when there aren't enough realistic alternatives."

Mr Donohoe was forced to defend his decision to raise the tax, stressing that "every cent" of extra money would go into green measures.

But he admitted there was "a risk" the increases, which will be repeated every year until 2030, could lead to protests.

"I'm very sensitive to that. It's the reason I didn't make a move on carbon taxation last year," he said.

"I lived through all of the political difficulties in relation to water charges, and I've learned from it.

"There are two things I've tried to do to respond back to that level of anxiety. The first one is giving a commitment that money raised through carbon tax next year due to this increase will be going back into climate-related measures. And the second thing is putting in place a very modest first change."

The increase also applies to heating fuels, but not until next May, which avoids a likely backlash when the winter cold sets in.

When the tax expands its reach, the increase will add about 70 cent to the price of a 40kg bag of coal, 15 cent to a bale of briquettes and €15 on a tank of home heating oil.

Most householders will be spared the extra cost until after the summer - and there is a €2 weekly increase in the fuel allowance taking effect immediately to take the edge off it - but when they do begin to hit home, another Budget and another increase of around €6 will be looming.

The staggered introduction of the tax over the coming 12 months means it will generate revenue of around €90m compared to the €130m expected if it was levied in full.

There are already competing demands on that pot, one-third of which is earmarked for "just transition" measures to support workers in the midlands facing the loss of their jobs in peat related industries.

The biggest chunk, some €20m, will be used on energy-­efficiency upgrades to social housing in the midlands.

The aim is multifaceted. It is expected 400 jobs can be created by the scheme, which will also improve living conditions and cut heating costs among low-income households in the area.

But the initiative is also to be used to develop a model for rolling out bulk upgrades in groups of houses to allow for economies of scale and lower costs in both public and privately owned estates throughout the country.

What's left of the carbon tax revenue will be split on a range of measures, including increasing the availability of grants for electric vehicle purchase and the number of charging points in communal settings.

Other projects to benefit will include new greenways and urban cycle paths and sustainable agriculture initiatives.

Reaction to the carbon tax increase was mixed.

Seamus Boland, chief executive of Irish Rural Link, said it would have a disproportionate effect on rural dwellers.

"The increase in the fuel allowance will not combat the impact of the increase in carbon tax, because many households don't qualify for this allowance," he said.

"Carbon tax will not change behaviour, because alternatives are not available or affordable to many people in rural Ireland."

The Environmental Pillar, a coalition of 30 national environmental groups, had called for a €20 increase in the carbon tax and said €6 could be counterproductive.

"The marginal increase in fuel price is too little to change behaviour and bring down emissions, yet enough to raise concern among the wider public already suspicious of the tax," it said.

The Irish Petrol Retailers Association said the increase was acceptable as it was modest, and global oil prices had reduced in recent times.

Irish Independent

Also in Business