Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I thank my colleagues for raising this important issue. I have been asked by the Minister for Finance, Deputy Noonan, to respond.

The Minister provided for the application of a carbon tax to solid fuels in budget 2013. In order to lessen the potential impact on lower income households, he chose not to introduce it until after the 2012-13 winter period and opted to introduce the tax in two phases, that is, €10 per tonne of CO2 from 1 May 2013 and a further €10 per tonne from 1 May 2014, thus bringing the carbon tax on solid fuels in line with that on all other fossil fuels, namely, €20 per tonne of CO2. The net effect of the €10 carbon tax from 1 May 2014 will be approximately €1.20 on a 40 kg bag of coal and 26 cent on a bale of briquettes.

Deputies will be aware that the application of the carbon tax to solid fuels remained subject to a ministerial commencement order dating back to 2010. This approach was primarily adopted to delay the application of the carbon tax to solid fuel in the residential sector so as to allow for the development of a robust mechanism to counter the large-scale sourcing of coal from Northern Ireland, where lower sulphur standards apply. The Department of the Environment, Community and Local Government undertook to provide such a robust mechanism in conjunction with the National Standards Authority of Ireland, NSAI. As part of that exercise, the Department, in conjunction with the NSAI, consulted with a stakeholder working group that included officials from the Department of Finance, the Revenue Commissioners, the industry representative - the Solid Fuel Trade Group, SFTG - the Environmental Protection Agency, EPA, and representatives of selected local authorities. Such a mechanism has been in place since June 2011. The application of the carbon tax to solid fuels was further postponed in 2012, given the overall tax increases in budget 2012, including in the standard rate of VAT.

The introduction of carbon tax was about sending a price signal that there was a cost associated with the consumption of fossil fuels to the detriment of our environment. It should also be noted that solid fuels have the highest carbon content of all fossil fuels. As a result, they are considered the dirtiest fuels and, given the environmental impact, it is important that they be taxed accordingly.

In the context of domestic heating provision, the carbon tax is intended to apply to all types of coal and commercial peat. According to the ESRI, low-income households usually make extensive use of cheaper, but more carbon-intensive fuels such as coal and turf. The effect of the €10 per tonne of CO2 emissions from 1 May this year will result in an increase of €1.20 on a bag of coal and 26 cent on a bale of briquettes. The issue of fuel and energy poverty is being addressed through the energy affordability strategy, which aims to tackle energy affordability through a combination of institutional supports, investments in improving the energy efficiency of our housing stock and wide availability of advice on energy efficiency. In a decision of 14 September, the Government agreed to publish the strategy with a view to its full implementation.

While tax increases are always unpopular, where member states are under fiscal pressure it makes sense to increase taxes in areas where some benefits can arise. In this instance, a carbon tax promotes energy efficiency, reduces emissions and reduces our total dependence on imported fossil fuels. Accordingly, and unfortunately for the purposes of this debate, the Minister does not intend to defer the further increase of €10 per tonne of CO2 emissions from 1 May.

See this speech in context