Drivers face instant petrol price hike from Budget Day carbon tax
Motorists can expect to be hit with an immediate hike to petrol and diesel prices in next week’s Budget.
Finance Minister Paschal Donohoe is to order that the price of fuel at filling station pumps across the country be raised from midnight on Tuesday.
The carbon tax increase will be one of the most controversial measures in Budget 2020 – but there may be some reprieve on domestic fuel such as home-heating oil, briquettes and coal.
Sources have told the Irish Independent that Mr Donohoe may hold off on increases to those products until 2020 amid fears about the impact on families and pensioners as we head into the winter months.
It is understood plans are being developed to have mechanisms in place “to deal with fuel poverty” before home-heating oil is targeted. This could see price hikes delayed until January 1 or possibly even until spring 2020.
The carbon tax, which is currently set at €20 per tonne, has not increased since 2014.
The Government now intends to raise it by between €6 and €7 in the first of what will become annual increases for the next decade.
The new income will be divided into three pots for dealing with fuel poverty, a ‘just transition’ and ‘behavioural change measures’.
There is an option to stall increases until the new year but sources say an immediate hit on road fuel is the favoured option.
It will add around two cents to the price of a litre of petrol and diesel, which currently stands at an average of 144.7 cents and 134.4 cents respectively.
Industry experts predict that a motorist will end up paying an extra €1.20 per fill of their tank. A typical fill of kerosene home heating oil - 900 litres - could potentially rise by €15-€16 in such a scenario. A 12.5kg bale of briquettes may increase by around 15 cents, and a 40kg bag of coal could rise by in excess of 70 cents.
Taoiseach Leo Varadkar has already confirmed that all new income collected from the carbon tax will be ring-fenced for measures relating to climate action.
The Irish Independent can now reveal that the money, in the region of €130m, will be separated into three funds.
One will be assigned specifically for dealing with fuel poverty issues. It is expected Mr Donohoe will use some of this pot to top up the means-tested fuel allowance which is currently paid at a rate of €22.50 for 28 weeks from the end of September.
The second tranche of carbon funds will be channelled towards 'just transition' projects.
These will include sectors and areas most affected by the country's efforts to reduce carbon emissions.
It is understood Mr Donohoe is being urged by many within his own party and Fianna Fáil to consider special measures to employees at Bord na Móna.
The Midlands were dealt a devastating blow last year when the company announced 430 voluntary redundancies.
And while company sources deny the remaining 1,600 jobs are at risk, fears are mounting hundreds more will be laid off as peat production is wound down.
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The final pot of money will be used for "behavioural change measures".
This will involve initiatives aimed at getting ordinary workers and consumers to reduce their carbon footprint.
Carbon tax was first introduced in 2009 and has generated more than €3bn for the Exchequer since.
It will bring in around €440m for the Government this year - even before any hikes are applied.
The Government's Climate Action Plan commits them to raising the rate per tonne to €80 by 2030.
Mr Donohoe is likely to be set out a trajectory for annual increases in his Budget package.
The minister shied away from an increase last year amid a backlash from rural TDs.
However, the environment has moved dramatically up the political agenda on foot of global protests by children and the Green Party's strong performance in the local and European elections last May.
Launching its pre-budget submission yesterday, the Green Party proposed that the carbon tax should be raised doubled next Tuesday.
The Labour Party proposed a €10 increase in the price of carbon, suggesting some of the money could be used improve home retrofitting and public transport.
Fianna Fáil, which will help the Government pass the budget under a confidence and supply arrangement, also supports an increase in carbon pricing.
FF leader Micheál Martin said in recent weeks that he believed an increase of €5 or €6 would be appropriate.
"If you go at it too heavy in the early years, you can actually jeopardise the whole political acceptability of it," he said.
Sinn Féin is the only major party to oppose the measure, arguing that such a tax would not help change habits.