Professor Alan Barrett:

I will respond to the Deputy's question on climate change. I am a member of the climate change advisory council in an ex officiocapacity. There are four heads of State agencies represented on the council. I should preface my remarks by saying that I am not speaking on behalf of the climate change council. My view is personal, although it may reflect the position of some of my colleagues. When people think about climate change they very often think in terms of State subsidisation - in other words, what will the State have to pay to assist people. The real economics argument is that a huge amount can be achieved through tax system measures such as carbon taxes and so on, and that leads to a double win. In other words, it creates a revenue stream and at the same time leads to the type of environmental outcomes sought. That is something I would be enormously sympathetic towards. I believe it allows for the possibility of moving us in the direction that we need to go.

On the distribution point, the counter-argument to that sort of approach is very often that measures such as carbon taxes are highly regressive, which is true, but again, as colleagues in the ESRI and elsewhere have argued, this is rebalanced by the welfare system. It is almost in the direction of the hypothecated taxes about which we were speaking earlier. These measures are brought in and they do raise difficulties for certain people. The revenue should be moved in such a way as to alleviate the difficulties while incentivising good climate behaviour.