Jimmy Devins (Sligo-North Leitrim, Fianna Fail)

I welcome the opportunity to discuss the important topic of energy and taxation. During the course of the debate, Deputies have made some interesting contributions. My colleagues, the Ministers for Finance and Communications, Energy and Natural Resources, have set out the Government's response to the proposal.

This morning, having followed the debate closely, I echo the comments made by them and respond to some of the issues raised. With regard to the economy, as the Minister for Finance, Deputy Lenihan, rightly pointed out, it is important that energy and taxation policy are framed in the context of the current economic situation and the current challenges we face. The economic environment has clearly become more challenging in recent months. A number of the risks identified at budget time have subsequently materialised, although, as already pointed out in the debate, most of these developments are on the external side and effectively beyond our control.

On the domestic front, we are all aware of the sharp slowdown in the residential house building sector. While we may experience a year or two of fairly low levels of completions, it is reasonable to expect over the medium term that annual completions will return to sustainable levels which will remain high by international standards, reflecting the strong underlying demand for housing in Ireland. It is of interest to note that the economy's flexibility and resilience was one of the main themes of the recently published medium-term review by the ESRI. The ESRI shares the Government's view in that we should see a return to trend growth from 2010 onwards. In other words, we are dealing with the challenges from a position of strength.

In terms of the public finances, there can be no denying that our fiscal position has changed from that envisaged at budget time. It is important, however, to point out that the current situation is manageable, given the strong position of the public finances. It is equally important to stress that, despite the underlying strength of the public finances, the Government is determined that there will be no unnecessary loosening of fiscal policy. We must control current spending to keep it in line with resources and it is crucial for Departments to adhere to the significant levels of current day-to-day expenditure provided for their activities this year.

Energy, investment and taxation policy, to name but a few areas, must be framed in this context. Regarding energy policy, which is key to our future economic growth, the Minister for Communication, Energy and Natural Resources, Deputy Ryan, has set out the considerable progress being made in terms of commitments and actions under the energy policy framework. Global developments regarding the continuing high price of oil and fossil fuels with climate change present significant challenges. These must be addressed in the context of the wider economic and competitiveness needs of the economy, having regard to emerging budgetary realities.

I wish to turn to the issue of taxing carbon-related windfall gains in the electricity generating sector, which forms one side of the equation proposed under the motion. The issue of windfall gains to electricity generating companies that arise as a result of the free allocation of carbon allowances under the EU's emissions trading scheme is a complex one. Deputy Burton raised a number of relevant and interesting points in this regard last night. It is an international issue and one that faces not only Ireland, but all EU member states. This issue is subject to an ongoing examination by the Department of Finance and the Department of Communications, Energy and Natural Resources which will take account of all implications and in particular the need to be certain about the effectiveness of any initiative. However, it has already been mentioned that only one EU member state has introduced measures to deal with this issue and these are now subject to appeal and legal challenge. Against this background, it is clear that the issue requires very careful and in-depth examination.

It must be recognised that 70% of the free carbon credits allocated to the power generation sector were allocated to the ESB, a public sector company. As we have heard, it is proposed that from 2013 allowances will be auctioned and this issue will no longer arise. For the coming years, it will be a matter for consideration. However, there is an argument that putting a levy on windfall gains of electricity generating companies could seriously hinder the development of alternative energy sources. Yesterday in this House the Taoiseach stated that it is important to point out that the revenues available to the ESB and others are factored into their capital programmes for providing alternative energy sources.

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