Mr. Joseph Curtin:

I thank the Chairman. It was nice to meet him a couple of days ago. I am delighted to be here. It is always an honour to be invited to speak to this committee. My colleague and I are delighted to contribute to the committee's debate on implementing Ireland's climate change strategy.

To be brief, I want to focus on two issues in our opening address, but we are happy to take questions on any issues arising. First, I will make a few comments about the national mitigation plan. Second, I want to talk about how we can meet Ireland's climate objectives by reducing income taxes. Reducing income taxes is something that I know politicians often like to do, so I hope that if I talk about the opportunities for reducing income taxes, that might capture the committee's attention.

As members will know, the Government's climate strategy envisages that we will exceed our climate targets for 2030 by between 87 and 113 million tonnes of carbon dioxide emissions. It could actually be more than that, because of how rapidly the economy is growing and how quickly the dairy sector is expanding. An analysis of the draft mitigation plan that the institute produced last year made a number of observations. First, we said that the plan makes no provision whatsoever for the cost that failing to meet the obligation might impose on the Exchequer. Second, the plan did not assess the dramatic overshoot and what implications that will have for the key sectors individually. Third, there was no analysis of the relationship between strategies for individual sectors, for example, Foodwise 2025 and our carbon budget. Finally, very few new measures were brought forward in the national mitigation plan.

There have also been a number of critical developments since this plan was published. On the positive side is the national development plan, which made a number of highly ambitious commitments to climate investment. On the negative side, the Department of Finance produced an estimate which suggested that the Exchequer would be liable to €600 million per annum in total compliance costs by 2021 if we fail to take action. That is €600 million euro per annum between 2021 and 2030. Lastly, Ireland's climate target for 2030 was finally agreed by the European Parliament on 17 April 2018. On the basis of these three developments and the shortfall or the shortcomings we identified in the original national mitigation plan, the first point we want to make is that it may be time for a new national mitigation plan already. If the plan is to spend billions of euro of taxpayers' money to buy compliance instead of decarbonising at home, this should be made explicit in the plan.

The second point I wanted to make concerns how we can address climate change by reducing labour taxes. The national mitigation plan promised in 2018 that Government would provide an examination of the impact of the carbon tax. I want to state that between 2008 and 2016 the share of labour taxes as a proportion of overall taxation rose from 31% to 36%. This has damaging impacts. Obviously it reduces the incentive to work, it damages economic competitiveness and it reduces the growth potential of the economy. The biggest opportunity for immediate climate action is to reduce these income taxes. In our written statement we illustrate several ways that this could be achieved - through modification to the universal social charge, USC, or the 20% or 40% income tax rate. Before I come to the catch, I note that this would yield €500 per annum to every taxpayer in the country. The catch is that we would need to increase the carbon tax by €50 per person, and that would offset the overall reduction in tax take to labour taxes. Taxing bad things like environmentally destructive pollution makes sense, especially when we get to alleviate the burden on hardworking families at the same time.

Increasing the carbon tax in this manner gives householders choices. It encourages short-term and long-term behavioural change. Electric vehicles and hybrids are going to become much more attractive, because petrol and diesel will be pricier by about 13 cents per litre. Many commuters have options to avail of public transport, walking and cycling, but of course not all commuters have options of those kinds. Many people are locked into car-dependent lifestyles and would need to use some of their tax windfall to pay for additional transport costs, at least until the time comes to purchase a new vehicle.

Another area of concern is home heating. An electric heat pump or a wood-burning stove will suddenly seem like a great deal. The incentive to invest in a retrofit, which many families are considering already, will become a greater priority, and thriving new economic sectors will arise to meet those needs. A bale of briquettes and a bag of coal are going to be more expensive, so wood-based solid fuel heating products will take up more and more shelf space in stores over time. If the tax can be accompanied by low-interest loans to help householders make deep retrofit investments, all the better. In fact, I think this would be very important.

It is obviously essential to ensure that the impacts are managed carefully for the most vulnerable in society. Increasing welfare payments and fuel allowances can offset the negative impacts for the elderly, the unwell and the unemployed. We often hear that there are no solutions to climate change from the Government. While an increased carbon tax is certainly not a silver bullet and it would not solve all our problems, it would be a good start. It makes every other measure that we need to achieve easier to achieve. It makes the Government expenditure required for things like subsidies for heat pumps or home retrofit lower because fuel costs will be more expensive, so these measures are more attractive by themselves. Practically every single climate expert in the world who might testify to this committee would say that an increase in the carbon tax is not a silver bullet, but it has to be at the absolute core of a coherent national climate strategy. What we need now is not more analysis but some focus on implementation.