Carbon-tax hikes to be ring-fenced for fight against climate change

Taoiseach Leo Varadkar. Picture: Collins

Cormac McQuinn and Fiona Dillon

The money raised from extra taxes on diesel, petrol and home heating oil will be ring-fenced to fight climate change, Taoiseach Leo Varadkar will tell other world leaders today.

In the clearest signal yet that fossil fuels will be hit on Budget Day, Mr Varadkar will use a speech at the United Nations to highlight ways he plans to change individuals' habits.

He wants to use the proceeds of carbon taxes to create a climate fund "to make change possible".

The Government was heavily criticised by environmentalists for failing to increase the carbon tax - which currently stands at €20 per tonne - in last year's Budget.

There is a commitment to hike the tax to €80 per tonne by 2030 - but the speed at which it will be raised over the next decade remains unclear.

There will be an increase in the tax on diesel, petrol, home heating oil and solid fuels announced in next month's Budget. That is likely to raise in the region of an additional €130m.

One option being considered is that households would pay the tax upfront but ultimately get a 'dividend' back in the form of a lump sum from the Government.

However, Mr Varadkar's comments suggest Finance Minister Paschal Donohoe is more likely to use the income for specific initiatives aimed at bringing about what is known as "a just transition".

There will be efforts to help find new jobs for workers whose livelihoods are at risk from the move away from fossil fuels.

The Irish Independent also understands Mr Donohoe will allow some of the carbon tax returns to be filtered into supporting vulnerable households through the fuel allowance.

However, raising the tax is expected to prove controversial and is unlikely to be easy given the débâcle that was the introduction and scrapping of water charges.

It will come against the backdrop of already rising fuel costs, and Sinn Féin and hard-left political groups are already trying to whip up opposition to any increases.

Fine Gael and Fianna Fáil - which facilitates the minority government - both agree on the need to raise carbon tax as part of efforts to reduce Ireland's carbon emissions.

Both parties stress measures to protect people at risk of fuel poverty must be brought in along with any tax rise. A figure of €6 per tonne is being touted as the likely increase for 2020.

A hike to €26 per tonne would bring in additional revenue of €129.6m.

Mr Varadkar will today address the UN Climate Action Summit where he will outline Ireland's approach to climate action.

"Leadership is required to take action and I believe leadership is also required to convince people that it is not too late to act. It's not," the Taoiseach will tell delegates.

"We are inspired by children and young people who have embraced this cause and keep it at the top of the agenda."

He is to outline how the Irish Government has listened to views on climate action through a Citizens' Assembly and an Oireachtas committee.

Mr Varadkar will tell of the Climate Action Plan and how it will be underpinned by a law that will include carbon budgeting.

"We have a carbon tax and have a cross-party agreement to increase it to €80 per tonne by 2030," he is expected to say.

"From next year, all new revenues raised from carbon tax will be ring-fenced to fund climate action and 'just transition'."

Measures to ensure a just transition will include efforts to "protect those most exposed to higher fuel and energy costs" and help for people who need to find new jobs.

Mr Varadkar will say that climate action measures that will be funded aim to see the "transformation of our transport, electricity, build-ings and food production systems".

"This new Climate Fund will provide billions to make change possible," Mr Varadkar will add.

The Irish Independent reported last week that some ministers think the carbon tax could be re-branded as 'the green tax' amid fears of a repeat of the water charges disaster.

Meanwhile independent think-tank Social Justice Ireland (SJI) said introducing a levy on single-use coffee cups would yield €96m and contribute towards the funding of a new €500m sustainability package.

It has drawn up a package of measures which it believes would help to deliver on Ireland's environmental commitments.

Among its proposals, is a €118m investment in renewable energy and a €15m investment in electric vehicles.

The group has also proposed a €212m "just transition fund" that would finance programmes, including retraining and support for those communities that will be worst affected by the loss of jobs, as well as investment in the deep retrofitting of homes and community facilities.

Michelle Murphy, research and policy analyst with SJI, said the €500m sustainability package could be funded through a number of measures, including hiking carbon tax and introducing "environmental taxation measures". It said a commercial air transport tax could yield €210m.