Colm Brophy (Dublin South West, Fine Gael)
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I remind members and delegates to turn off their mobile phones, as interference caused by them affects the sound quality and transmission of the meeting.

I welcome Edgar Morgenroth, Professor of Economics at Dublin City University and formerly of the ESRI. I thank him for attending.

Witnesses are protected by absolute privilege in respect of the evidence they are to give to the select committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

I ask Professor Morgenroth to make his opening statement.

Professor Edgar Morgenroth:

I thank the select committee for inviting me to appear before it. It is a great pleasure to be here.

In my brief opening statement I will outline the objectives of the ESRI's study of the environmental impact of fiscal instruments, the approach used and the findings, particularly in respect of the taxation of motor fuels. I was the lead author of the report which was completed while I was still at the ESRI.

The research which was funded by the Environmental Protection Agency, EPA, sought to assess the extent to which fiscal instruments in Ireland, particularly those not specifically aimed at achieving environmental goals, had environmental impacts. The premise for the work was that while the fiscal implications of taxes, tax expenditures and subsidies were usually well understood, other potential impacts were sometimes ignored. This is important, given that the fiscal system, by adjusting prices, can play a significant role in changing behaviour. Overall, the findings confirm that a large number of fiscal measures have some effect in at least one environmental domain and that specific tax changes can make a significant contribution to achieving environmental objectives.

The approach used in the analysis was, first, to conduct a simple assessment of the potential environmental impacts of a large number of existing and potential fiscal instruments. This considers the incentives a particular measure sets, the likely resulting behaviour and the consequent expected environmental impact. The environmental impacts considered covered the main domains of climate change, air quality, water quality and land but did not include resource intensity. In total, 142 measures were considered, for which 246 impacts were identified, which implies that, on average, measures have an impact in more than one domain. The most widespread impact is on climate change emissions, with 98 measures having impacts. The least common impact is on water quality, with 23 measures having impacts. Just over half were assessed to have a likely positive impact on the environment.

The nature of the initial assessment of environmental impacts of the 142 measures does not identify the size of the environmental impact. It also does not provide a definitive assessment of the effects. To achieve this, a more thorough analysis is necessary. Therefore, a more thorough analysis was conducted in four case studies, including of the difference in diesel and petrol excise rates. The choice of case studies was influenced by the importance of specific sectors in generating environmental impacts and data availability.

The choice of the case studies in the report was influenced by the importance of specific sectors in generating environmental impact and by data availability. Agriculture and transport are the two largest contributors by sector to overall GHG emissions in 2015, so measures affecting those were chosen. As an example of measures that we would have liked to have looked at, a lack of data on the number and type of company cars prevented us from analysing the tax treatment of company cars. In future, that is something the committee might be interested in.

It is important to note that the changes in the tax system in Ireland introduced in 2008 have had a significant effect on CO2 emissions as they incentivised the purchase of more efficient vehicles - from a CO2 perspective at least. In 2009, just 13% of new cars registered were in the lowest emission category but by 2016 that had increased to 78%. However, the rising stock of new vehicles was accompanied by longer travel distances and somewhat larger cars, so that on average the efficiency improvements have been more modest than one might expect.

Research has shown that the increasing dieselisation due to the motor tax changes introduced in 2008 resulted in lower reductions in nitrous oxide, NOx, emissions than would otherwise have been the case. Furthermore, diesel vehicles produce significantly higher levels of particulates, PM, impacting significantly on air quality. That and the vehicle emissions testing scandal have raised the awareness of these emissions. The higher level of emissions compared to those claimed by manufacturers combined with growing traffic volumes have resulted in poor air quality in many European countries. As a consequence, and given the need to meet EU air quality regulations, many cities are now considering diesel bans or at least bans on diesel vehicles that do not meet the Euro 6 standard.

In order to assess the potential impact of raising the excise rate for diesel to that of petrol a simple simulation was conducted. This involved assessing the response of motorists to a change in the price of diesel resulting from excise equalisation, which was based on estimates of the price responsiveness from the academic literature. These calculations take the current composition of the vehicle stock, which have been significantly determined by the tax changes introduced in 2008 as given - that is important as the results would be very different if they were calculated using the 2008 car stock as a basis. The simulations do take into account that some motorists might switch to petrol vehicles.

The analysis shows quite broadly that an equalisation of excise rates of petrol and diesel to the current rate for petrol would reduce fuel consumption, drive down vehicle-related emissions and provide a revenue boost to the Exchequer. The simulation results suggest that NOx emissions would be reduced by 3.8% and PM emissions would be reduced by 4.1%. Tax revenue could increase by more than €500 million. It is important to note that these simulation results are not precise predictions, but indicate the broad magnitude of the effect holding other factors fixed.

Overall, the analysis shows that the environmental impact of the fiscal system should be studied more carefully as some measures have significant environmental costs. The appropriate reform of these measures could make a significant contribution to reducing Ireland's GHG emissions and reduce local pollution. I again thank the committee. I am happy to take any questions.

Colm Brophy (Dublin South West, Fine Gael)
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I thank Professor Morgenroth for his opening statement. I call Deputy Eamon Ryan.

Eamon Ryan (Dublin Bay South, Green Party)
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I thank Professor Morgenroth for his presentation today and also the paper commissioned by the EPA and the ESRI. Has he seen any research to consider the long-term effects of vehicle taxes on petrol or diesel vehicles and the evolving development of electricity as a fuel transport system? The Government has said that by 2030 we will have a ban on any new vehicles with internal combustion engines. I presume it will still take a couple of decades after that for the lifecycle effects to take effect but one would hope that by 2040 or 2050 we will have a 100% electric fleet. Is Professor Morgenroth aware of any work done by a government to look forward in such a timeframe at how it will replace its tax revenue base from excise duties on diesel and petrol and VRT? How do we start to plan for that phase out or how could we encourage or accelerate it by adjusting our tax system? There is an impetus there that we want to maintain given that it is not an insignificant chunk of our revenue base. No finance Minister will want to undermine his long-term viability. Has Professor Morgenroth or anyone else done any work on excise duties or tax changes on petrol and diesel as part of a long-term strategy rather than a short-term reaction to variations in diesel prices?

My next question is a broader more philosophical one. I am on the Joint Committee on Communications, Climate Action and Environment and we recently had officials in who are looking at the next iteration of our evolving response. We have to formulate a policy document on climate and energy for the European Union by the end of the year along with a mitigation plan, the national planning framework and so on. My understanding of the comments they made before the committee is that they are looking at tax now as one of the next main policy instruments in how we reduce emissions. Given some of the analysis he has done does Professor Morgenroth have any advice on the effects of the 98 or so possible fiscal instruments that might affect climate policy? Are there any recommendations in terms of what the Government's approach should be?

In the past I have been in favour of the introduction of carbon taxes, among others. Does Professor Morgenroth agree that to a certain extent the difficulty with using tax measures is that an over-reliance on them as a policy instrument brings the risk that by their nature they tend to bring marginal change? They can act as a nudge in a certain direction when a lot of the decisions we will have to make in the climate change area relate to systemic change, for example, an end to the extraction of peat or the creation of a national land use plan, changes to CAP supports or changes to the transport budget. They are all policy decisions that require a system change, as it were, rather than relying on marginal tax signals so that one gets a marginal change over time. They will not deliver the sort of systemic change we need for the scale of emissions reductions that are required. Does Professor Morgenroth have any thoughts on that last broad philosophical point on how we use tax measures for environmental gain?

Professor Edgar Morgenroth:

I will take them in turn. On the first point, I think the issue the Deputy raises is very important. My estimates are that in or around 10% of our tax revenue comes from transport, which is very significant. When one compares that to other countries, by a margin, it is the highest that I have been able to calculate. In the UK it is in or around 4% to 5%, so it is less than half. In Germany and the Nordic countries about 2% of tax revenue comes from transport. The international literature has looked a little bit at environmental tax reform where one essentially taxes pollution and subsidises anything that does something good to the environment. The scale of the tax revenue is so significant that if people behave rationally and reduce the pollution they cause, which is dependent on that level of pollution, one automatically reduces one's tax revenue.

It is impossible to design a scheme where one keeps one's tax revenue as it is while simultaneously achieving the desired behavioural response. While the tax measures are very effective, as shown by the fact that otherwise one would keep getting the same revenue, they will eventually cause other issues for revenue generation in the State. One has to be very careful about how far to bring this and a plan is needed because if tax revenue from transport is entirely dependent on taxing the bad things that come with transport, such as pollution, when that goes the revenue goes too and it will need to be replaced. That is a real challenge and it is more of a challenge in Ireland because the share here is so high. Other countries have looked at it, though I am not aware of any analysis. Given the scale of revenue from transport, however, simply using fiscal measures would have significant revenue implications.

The measure we picked in the report is quite nice and, at least in the short and medium run, it results in higher rather than lower revenue. If all motorists choose to go for electric vehicles, however, we will get no money from excise rates on fuel. Eventually, behavioural change will have an impact on revenue. The evidence shows that fiscal instruments have a big effect and the growth of diesel has been a direct consequence of the changes introduced in 2008. These changes reduced our CO2 emissions but they have left us with other issues. Things such as PM and NOx emissions were not part of the considerations in 2008 and people were mainly talking about CO2 because that is what we wanted to address. On their own, however, these measures are not enough and more needs to happen than just tax changes.

The ESRI has done some work on the potential market penetration of electric vehicles. Clearly, the type of vehicle needs to broaden to have a wider appeal and if one drives long distances the current set of electric vehicles is probably not ideal because, without recharging stations, a driver might be too limited. Similarly, an electric vehicle is not really suitable for towing big loads. In certain segments of the market the industry has not provided suitable solutions to enable us to get the penetration we require.

In respect of our general over-reliance on tax, one should always think of having a mix of policy measures, with taxes playing a role within that. I have written about spatial patterns of land use and if we allow the sprawl to continue that will have transport implications, as well as implications for the way we deliver public transport. We need a wider set of measures to achieve our goals.

John Lahart (Dublin South West, Fianna Fail)
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It is a fascinating debate. Professor Morgenroth hints that he will return to the subject and that further analysis is needed so I look forward to hearing more. I feel sorry for the diesel people. The report points out that a measure was taken to address a matter in 2008 but, in the meantime, it caused something else, meaning we need to change it and introduce excise parity as between diesel and petrol. What does Professor Morgenroth say to all the diesel car owners who made the switch, in good faith and for environmental reasons, but will now be penalised? The professor said the measures had an impact on CO2 but the people who switched to diesel bought bigger cars with bigger engines, a development which was impacted by the treatment of motor tax.

The mayor of Paris is trying to ban cars and there are movements in this area. I am alarmed that 10% of our tax revenue comes from transport. I was not aware of that and I wonder how it compares internationally. The professor also raised a concern for the future, which is that if there is a switch from conventional combustion engines to electric cars it will have an impact on excise.

Ireland is largely dependent on fossil fuels for its energy, even for electric cars, and the more electric cars we have the greater the reliance on fossil fuel. Can Professor Morgenroth comment on that? We were told the switch from leaded petrol to unleaded petrol, 30 years ago, would reduce emissions and that there would be other consequences. If there was a dramatic shift in motor tax changes and people returned to petrol, what would the consequences be for CO2 emissions? It seems people are drifting back to petrol at the moment and those who thought they were doing the right thing in 2008 now realise they are causing more pollution in the city.

The emissions scandal has never been addressed here. Drivers made a switch in good faith and we do not even know if this led to a reduction in emissions. We have not really reported on this in Ireland, and though I put down a couple of parliamentary questions about it I only got a curt response. Does the ESRI have something on that?

The paper is very thought provoking and necessary as the first step of many. I look forward to further outputs. However, as demonstrated by the excise changes in 2008, consumers are quite prepared to make changes if they think there is an environmental good. However, they have been codded by the industry in this regard.

Has Professor Morgenroth any comment to make on that? To repeat my first question, what would he say to diesel drivers who made the switch in good faith in the belief they were doing something environmentally good? They may have a 15 D, 16 D, 17 D or 18 D registration and he is now saying the ESRI will recommend increasing the excise rate on diesel as a budgetary measure.

Professor Edgar Morgenroth:

I thank the Deputy for the compliment. If it stimulated some thought, that was very much what we tried to do with the report. The Deputy is quite right in saying that we focused on CO2 emissions. The way the tax system was changed at the time - it was not only the excise duty as the Deputy rightly pointed out - generated reduced CO2 emissions but we did not think about the other emissions. We know at this stage that the other emissions are pretty important. It is probably a more important issue in some other jurisdictions where, for climatic reasons, the emissions of particulates cause a bigger problem. It is typically windy here and we are lucky to get rid of the emissions but, nevertheless, the concentrations when one measures them, particularly at peak traffic times, are significant and they have negative health consequences. We have this knowledge now and it would not be right to ignore that.

The Deputy asked what we would say to consumers who made a choice in good faith. I have to admit I drive a diesel car. If we consider it in terms of CO2 emissions, for certain types of drivers it continues to be the exact right choice because there is nothing better for them on the market. That was the point I made to Deputy Ryan, namely, that the industry also has to develop vehicles that suit all types of drivers in terms of journeys. Many of the electric and hybrid vehicles tend to be more suited to urban traffic. In Ireland we have much more cross-country traffic. Those things also need to happen.

I appreciate that the average diesel vehicle owner would not be happy to be facing higher taxes. There is no doubt about that. The question is what the right thing to do is in terms of measures and how quickly we want to do something about it. We took a very simple approach here. We simply said let us do an assimilation of changing the excise rate all at once. As a policymaker one might think a more gradual change might be more appropriate because there are other criteria one needs to be concerned about. We simply looked at only the environmental issues.

The impact of changing not resulting in a reduction in CO2 emissions as one might expect is something that is called the rebound effect in economics. We see that in many different areas. If people insulate their homes, they end up turning up the heat a little bit. They get some of the benefits through comfort in the end and they waste some of it. We find the same thing happens in this case. If one has a more efficient vehicle, one is more inclined to go a bit further, and that is what we have seen. It is not surprising that this has happened. It is a question of whether we will see a similar trend if we return to having more petrol-based vehicles. To answer the Deputy's question, that would probably end up with us having higher CO2 emissions. The idea would be to go from consumers moving from diesel to electric or hybrid vehicles and, it is hoped, not having higher CO2 emissions. It is a question of exactly how one structures the tax system to enable the right change to be made rather than going in the wrong direction.

John Lahart (Dublin South West, Fianna Fail)
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If half of the motoring population converted to a hybrid or electric car in the morning, I asked what impact of that would be in terms of CO2 emissions. While there would be no carbon emissions from the electric vehicle, there would be carbon emissions from the manufacturing of them and from the battery. What would the carbon emissions impact of the fossil fuel energy burning power plants that are essentially there to power those vehicles? Has any work done on that.

Professor Edgar Morgenroth:

I was going to get to that. I am not aware of any such work. Clearly, it is an interesting issue. There is no such thing as zero emissions. It is all relative. We end up with lower emissions. If we generated electricity through renewable means, it would be close to zero emissions but the steel produced to make the wind turbines would still generate some emissions. Getting to zero emissions is quite difficult. If we could achieve that, it would be quite a feat for humanity. Lower emissions is what we would get.

The Deputy mentioned the issue of the emissions scandal. There are a variety of issues around this. It is not only that there was software used to hide the emissions that were coming out. We know that in typical driving conditions the vehicles are not achieving anything close to the stated manufacturers' emissions. We know from international evidence that the gap between the theoretical emissions that are produced in a laboratory and the emissions achieved with standard driving has been increasing. It also varies systematically by manufacturer. There is evidence to that effect. The fact that gap has been increasing is quite important. It is ultimately a matter for the EU which sets the standards, including the way those tests are generated. That needs to be addressed at EU level so that we do not end up with theoretical laboratory condition emissions and fuel consumption values. Many consumers tend to focus on the fuel consumption of the vehicle. They buy the vehicle and end up finding that the fuel consumption is 20%, 30% or 40% higher in practice. That is also not satisfactory from a consumer protection perspective. That is something that the European Commission certainly needs to deal with.

John Lahart (Dublin South West, Fianna Fail)
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I thank Professor Morgenroth.

Colm Brophy (Dublin South West, Fine Gael)
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I call Deputy Broughan.

Tommy Broughan (Dublin Bay North, Independent)
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I welcome Professor Morgenroth. This is a very interesting report. I recall proposing last year that we should start the equalisation process which would have given an additional yield of approximately €40 million. Page 31 of the report sets out steps to equalisation. The first step in 2018 would have yielded €68 million and so on. Does that take into account the fact that people will move from having a diesel vehicle or possibly returning to having a petrol vehicle because of the damage caused by diesel? I do not accept the mantra we have had from 2008 that people were not aware of this. I remember 25 years ago Volvo, in particular, drew attention to the PM10 emissions. A former Green Party colleague was Minister for the environment during that period and we had a had a major campaign about getting more particulate matter, PM, stations around the city. We only had three, one located in Stephen's Green and two others. We were well aware of the damage diesel can do in terms of carcinogens and so on. Nonetheless, the industry may have been facilitated from 2008 onwards. Many people are caught now with having vehicles that may be worth much less as time goes on.

When the UK opted for equalisation, how did it deal with it both in terms of excise rates and the motoring public? Should we take a step-by-step approach or go for a big bang approach? What would make more sense?

In his research, has Professor Morgenroth evaluated the harm diesel may be doing in terms of carcinogens in the cost benefit analysis of the two fuels?

Professor Edgar Morgenroth:

The Deputy is right. Particulate matter, PM, was known about. That is for sure. At the time the debate was very much about CO2. That is the point I am making. It is not that we did not know about it but it was not the No. 1 priority. In some ways it was almost allowed to happen because we knew that diesel vehicles were and have always been "dirtier". PM was known about decades ago. We had some evidence of the carcinogenic effects. We know a lot more now about how this happens exactly and we also know a lot more about the kinds of concentrations that one sees in heavily frequented routes. There has been a lot of research done in Europe.

On health damage, in the study we did not do a full cost benefit analysis. It would be a very interesting exercise because then we could use it to determine what the right level of excise might be. It might be equalisation; it might be more or less. This is the first step. That is what the report was aimed at. It was to raise awareness that fiscal measures can play a really important role and have played an important role in some areas. There are areas where fiscal measures are in place where we have not considered the environmental impacts at all and really have not thought about it. There are areas where we probably should where we know there might be an issue. The issue of company car taxation is an example. The UK made a change a number of years ago when it went from a similar system to our own, a mileage driven system, to one that was based on CO2, which has changed quite dramatically the composition of the company car stock. Fortunately in Ireland, we do not know much about company cars at all. One cannot find out the number, how far they travel or what engine size they have. That means one cannot do any research. It is something that ought to be addressed because there is scope to change the vehicle fleet much more quickly on the company car side than on the private car side. The typical privately-owned vehicle tends to be kept for a much longer period than a company car. When a company car is written off it tends to be passed on so there is a much quicker turnover.

Tommy Broughan (Dublin Bay North, Independent)
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A feature we have become aware of with the onset of Brexit is that we have a massive number of used car imports from the UK. How is that impacting on our excise situation? It is a phenomenal number. To some extent we seem to be becoming a single market in that people can purchase a new car in Belfast and it appears in Dublin at a related garage. It seems a better deal could be done in those circumstances by the people who are promoting this. Does that have implications? Are we unique in the transport-related tax we have? Our Green Party colleagues sometimes underestimate this. We have had incredible excise taxes in terms of vehicles. We have a fairly dispersed population that needs to be able to get in and out to the village and so on and so forth. Are we unique in that there is so much emphasis on excise in transport?

Professor Edgar Morgenroth:

That is correct. It is unique. It is not just excise. The fact that we have that additional vehicle registration tax, VRT, makes a big difference. There are motor taxes in general and VRT. On top of that there is excise and tolls and a few other smaller charges. When they are all added up they add up to a larger share than anywhere else I can get data for.

Tommy Broughan (Dublin Bay North, Independent)
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Is that because the political structure was fundamentally opposed to placing taxes on higher incomes or on certain parts of the economy?

Professor Edgar Morgenroth:

I have not done research on why we have this kind of high reliance but it is something we see and it is not well understood even in terms of its revenue generating functions. We know that the revenue from VRT, for example, declined very rapidly during the economic crisis as new car purchases dropped. That has a serious implication for the Exchequer as there is a reduction in income just at the time when there is an increase in expenditure. It is quite a volatile tax as well, which is something that we have not really looked at. I have done some research on related areas on other taxes but not on motoring taxes. The issue of imports is interesting. We may not see it but in Germany one cannot sell a second-hand diesel car. The values have absolutely plummeted. The reason is in Germany individual cities are contemplating bans. The market is not sure what will happen so the risk-averse thing is to not buy a diesel car. They are going in that direction. They are now going towards petrol cars and will probably end up with higher CO2 emissions, which is not really what we want either. In the meantime car dealerships are sitting on a very large stock of second-hand diesel vehicles that they cannot sell. Given they are left-hand drive, they are less likely to come here. If there was a similar situation in the UK for example, one could easily see them coming here if the market here was open for those vehicles. It could backfire having this back door into the Irish market of second-hand vehicles.

John Lahart (Dublin South West, Fianna Fail)
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May I ask a follow-up question?

Colm Brophy (Dublin South West, Fine Gael)
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Yes.

John Lahart (Dublin South West, Fianna Fail)
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Did the impact in the States of the emission scandal cause a dramatic switch?

Professor Edgar Morgenroth:

In America?

John Lahart (Dublin South West, Fianna Fail)
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Yes.

Professor Edgar Morgenroth:

What we are finding currently - it is something one can read about - is Volkswagen has hired very large areas in Texas that are full of cars it either cannot sell or had to take back. I think it is 300,000 vehicles; it is not a small number. It is having a very serious impact in the US. They were always a little bit more sceptical about diesel. Fuel prices in the US are much lower than here and consequently there are much bigger engines. There is more of a market for petrol vehicles anyway. I do not think this will have helped diesel at all. It has not had the same sort of effect in Ireland as it would have had in Germany, which is much closer. It really is quite dramatic but that is because they are talking about banning cars. If one is living in a city that is going to ban the car one owns, it is a real conundrum for people. It is quite a different measure from facing slightly increased excise tax. It is a really significant issue.

Colm Brophy (Dublin South West, Fine Gael)
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I have a number of questions for Professor Morgenroth. One of the most interesting things I took from his briefing and the questions he answered is that we are caught in a bind of our own making. As Deputy Broughan and Deputy Lahart alluded to, as a State we have historically used motor taxation as an effective revenue driver by having it so high at 10% of revenue raised. Our ability to influence environmental change through taxation is limited because if it is successful there is a major problem in that something we rely on as a revenue stream is compromised.

There seems to be a body of work. If future Governments want to incentivise an environmental regime of change through taxation then we will have to come up with another way. I am not saying that we give up taxing transport as a sector in terms of when people buy cars or whatever. However, the traditional model of collecting duty on fuel, road taxes, etc., will have to be considered.

I wish to advise members that we will invite representatives of the road haulage industry and various other people to meetings. I am struck by the fact that the Irish model means we will need diesel vehicles for a long time, and we will still require some diesel vehicles even with the 2030 situation. Am I correct? One reason is that the technology to produce a pure electric vehicle has not reached an advanced stage. Hybrid technology is effective when one uses it in a city or urban environment at a low speed and drives in a city or urban area. A hybrid car would use an entire tank of petrol if one drove from Dublin to Cork or a similar length of journey. Therefore, hybrid vehicles do not provide a real environmental gain when driven outside of an urban area. Am I correct?

I want Professor Morgenroth to clarify a contradiction for me. We talk about how effective changes can be but we, as a country, have shifted to using diesel vehicles in the 2008 period more than any other European country. Some countries now have their own issues with diesel. Certainly, from my experience of countries ranging from Spain, Portugal and up to Germany, the number of vehicles that use diesel is less than Ireland. Professor Morgenroth has said that the ability to have an effect through taxation is limited because of the high amount. If so then why has the taxation measure been so effective in this country? Can we learn from what we did in 2008 to re-engineer the system?

Professor Edgar Morgenroth:

I shall deal with the first and last questions together because they are related. Research shows that the change in 2008 resulted in a loss of about €1 billion a year in revenue. The system could have been designed differently and thereby have less of an impact on revenue.

Colm Brophy (Dublin South West, Fine Gael)
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Was the revenue loss broken down into the number of people paying, for example, lower excise on the cars they purchased, lower excise on the fuel they purchased or lower road tax?

Professor Edgar Morgenroth:

I think the full package was looked at and there was a loss of €1 billion in revenue. Some readjustments have been made to the tax rates since 2008. Clearly, it is not easy to find the right spot where one can achieve revenue goals while simultaneously achieve environmental goals. We probably went a little too far in incentivising CO2 emissions as it lost us some revenue and increased the diesel fleet. We might always have a larger diesel fleet in Ireland because a diesel vehicle is more suited to travelling longer distances. On average, our cars travel somewhat longer distances than other vehicles in other countries. Diesel is worthwhile because the purchase price is typically a little bit higher than an equivalent petrol vehicle. A diesel vehicle is only worthwhile once one travels a certain mileage and with higher miles one will always have a little more diesel. In addition, the tax change makes diesel vehicles more favourable. Therefore, one ends up with a larger diesel stock than one would have otherwise. I believe I have answered the first and third questions.

The Chairman asked if we will always need diesel. We still lack vehicles that suit every driver and every type of journey. Hybrid vehicles have been mentioned. Practical tests are more important than laboratory-based tests. In practical driving tests one does not tend to get much more than 40 km on a purely electronic charge in hybrid vehicles. That distance is adequate in an urban setting but not if one wants to travel from Dublin to Cork where one must switch the petrol engine on and, therefore, at that point one has a less efficient engine, from a CO2, than a diesel vehicle. We will probably end up with diesel being a more significant aspect of our vehicle stock than other countries where the average mileage is lower and hybrid vehicles are more likely to meet the demand of a larger section of the population. It will be a little bit different for Ireland and, again, land use patterns, etc. drive demand.

Colm Brophy (Dublin South West, Fine Gael)
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I thank Professor Morgenroth and call Deputy Lahart.

John Lahart (Dublin South West, Fianna Fail)
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Traffic bans and diesel car bans have been mentioned but they are not going to happen for the foreseeable future. One of the major culprits in a city like Dublin is public transport. What measures, if any, are taken in the cities that the professor has cited or are they electric buses? Obviously there are metros and things like that.

Professor Edgar Morgenroth:

The Deputy has asked a very good question. Remarkably, in many cities, even in Germany, diesel has increasingly been used as a fuel for many years even though suitable technologies were available. Let us take electricity, as an example. I grew up in a city that had electric buses. The buses were powered using overhead lines and no tracks thus making them cheaper than a tram system. Such buses existed back in the 1960s and maybe before then. Many larger cities in Germany have a good public transport system that includes trams, which are powered by electricity. They have also invested in electric buses and compressed natural gas. The latter is being trialled in this country at present. There are cities in Germany where vehicles, particularly municipal vehicles such a buses, are run on gas.

I wish to note an interesting development. The German post office could not find a suitable vehicle so it ended up buying a company and now manufactures electric vans really cheaply. A professor who worked in the University in Aachen developed a cheap electric van. He wanted one of the big manufacturers to produce electric vans but he got no offers. The German post office wanted such a vehicle and as it could not buy one it ended up buying the professor's company. Now the German post office manufactures and sells electric vehicles. It is a rather strange story but it shows that the market does not always supply what is needed to make a change. Therefore, we will have problems trying to make a change in every area, which is the biggest challenge at present.

Colm Brophy (Dublin South West, Fine Gael)
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As no-one else is offering, I shall conclude the meeting. I thank Professor Morgenroth for engaging with us on this matter.

I wish to advise members that we will arrange separate meetings with the Irish Road Haulage Association and the electric vehicle owners. This will ensure that we hear all sides of the argument. I thank Professor Morgenroth for his attendance.

I propose that we go into private session. Is that agreed? Agreed.