Professor John FitzGerald:

There is a significant body of evidence that carbon taxes work. Deputy Boyd Barrett put this issue to me in June at the Committee on Budgetary Oversight. I talked to one of the experts on the area and there is research which showed it worked in British Columbia. Deputy Bríd Smith quite correctly states that much is going on simultaneously and one needs fairly sophisticated economic research to separate out the effects. Since 1992, there is a paper a year from the ESRI on this subject. There is a vast literature out there. Professor William Nordhaus, who won the Nobel price for economics last year, is another of these people who have done work on it. This is not just an issue in Ireland, but across the world.

If one raises the price, one changes investment behaviour. For example, Volkswagen is not necessarily a nice company. The company is investing heavily in electric cars because it sees the taxation on fossil fuels going up all of the time. The company will go out of business if it does not produce a cheaper alternative. In Ireland, within three years, one will be able to buy electric cars as the cheap alternative. The price changes the decision on investment in a crucial way. If one looks at Dublin's taxis, how many Toyota Prius cars are there? The reason is not necessarily that taxi drivers care more about climate change than the rest of us. It is because it is the cheap solution given the price of fuel. In particular, higher prices discourage one from burning fossil fuels; it is an investment decision.

On housing, why do people retrofit their houses? Many of those who have done so to date have probably wanted to do the right thing, but one will not have this level of investment unless by so doing people save money because it is the saving of money that will finance future investment. Going back to Deputy Sherlock, there is a model in The Netherlands, which works there, where they will retrofit one's house for free providing they can make the savings on energy over the subsequent 30 years. I am not sure that model would work well here but it might be worth looking at.

People make the change because it is the cheap solution. The evidence is universal that this works. It is the investment decision that is important. The reason we want to see a promise to ramp it up over time is so that when the Deputy goes out and buys her next car, even if the petrol car is cheaper, the Deputy will know that over the lifetime of the car she would be better off with an electric car. That is the argument for carbon taxes.