Niall Collins (Limerick, Fianna Fail)

This Bill is a breach of trust for motorists who purchased environmentally friendly cars since 2008. The financial incentives established in July 2008 to encourage drivers to switch to fuel-efficient cars with low CO2 emissions was a core feature of efforts to tackle climate change. This Bill erodes the progress made on placing environmental concerns at the heart of public policy. It penalises those motorists who took the decision to use environmentally friendly cars by shifting the goalposts in the middle of the game. It sets a deeply unfortunate precedent of backtracking on efforts to tackle climate change.

The Bill gives a permanent legislative basis to the increases in motor tax rates and trade plate licences contained in the December budget. The Bill increases the motor tax rates for vehicles in CO2 bands A and B by 54% and 44%, respectively. For all other vehicles, except for certain exempted vehicles, and trade plate licences, the increase is 7.5%. This is the first increase in motor tax since 2008 and has been in effect since 1 January 2012. These increases are expected to yield an additional €46.5 million yearly. The choice to buy clean and green has been hit with €56 and €69 fees. These costs will be disproportionately borne by those motorists who in good faith availed of incentives to buy low CO2 emission vehicles.

This specific targeting of environmentally friendly cars is a regressive move by the Government that cannot be defended on purely revenue-based grounds. In our pre-budget submission we recommended a 5% rise in motor tax across the board, which does not rescind the environmental platform that Fianna Fáil built up while in Government.

Given the clear disregard for environmental concerns that underpinned this decision, it is worth looking back on the issues that originally led to the creation of incentives for low CO2 emission cars. The pressing global challenge of climate change is the backdrop to our efforts to encourage environmentally friendly driving. The comprehensive Stern Review on the Economics of Climate Change, published in 2006, points out the grave threats that climate change represents and the action we need to take to rise to this challenge. We should reflect upon the threats the Stern review sets out, which are as follows: all countries will be affected by climate change, but the poorest countries will suffer earliest and most; average temperatures could rise by 5°C from pre-industrial levels if climate change goes unchecked; warming of 3°C or 4°C will result in flooding for many millions of people; by the middle of the century, 200 million may be permanently displaced due to rising sea levels, heavier floods and drought; and warming of 4°C or more is likely to affect global food production seriously, while warming of 2°C could leave between 15% and 40% of species facing extinction. Before the Industrial Revolution the level of greenhouse gases in the atmosphere was 280 parts per million CO2 equivalent; the current level is 430 ppm CO2 equivalent. The level should be limited to between 450 ppm and 550 ppm CO2 equivalent, as anything higher would substantially increase the risk of very harmful impacts, while anything lower would impose very high adjustment costs in the near term and might not even be feasible. Climate change is the greatest and widest ranging market failure ever seen.

Those are the threats that we face. The report points to a number of actions that need to be taken. Three elements of policy are required for an effective response: carbon pricing, technology policy and energy efficiency. Carbon pricing, through taxation, emissions trading or regulation, will show people the full social costs of their actions. The aim should be a global carbon price across countries and sectors. Emissions trading schemes such as that operating across the EU should be expanded and linked. Technology policy should drive the large-scale development and use of a range of low-carbon and high-efficiency products. The economic and quality-of-life issues raised by climate change are stark, and the benefits of strong, early action considerably outweigh the costs. Unabated climate change could cost the world at least 5% of GDP each year; if more dramatic predictions come to pass, the cost could be more than 20% of GDP. The cost of reducing emissions could be limited to around 1% of global GDP, with people being charged more for carbon-intensive goods. Each tonne of CO2 we emit causes damage worth at least $85, but emissions can be cut at a cost of less than $25 per tonne. Shifting the world onto a low-carbon path could eventually benefit the worldwide economy by $2.5 trillion per year. What we do now can have only a limited effect on the climate over the next 40 or 50 years, but what we do in the next ten to 20 years could have a profound effect on climate in the second half of this century.

This major global challenge is the backdrop to the Government's decision in 2008 to encourage the use of environmentally friendly cars. It was part of holistic efforts to ensure Ireland fulfilled its duty and obligation to tackle global warming. The Government's decision to reverse this progress, betray environmentally conscious motorists and delay publication of a climate change Bill until 2013 indicates a failure to appreciate the gravity of the crisis and take action to tackle the core causes.

The decision to incentivise low CO2 emission vehicles is having a real impact on Ireland's efforts to contribute to tackling climate change. A total of 88% of new vehicles since 2008 have been purchased in the A to C bands as motorists have responded to the incentives, switching from high emission cars to low CO2 emission vehicles. This switch was made on the basis of the financial incentives provided, but the Government is now jeopardising that progress.

Last year the Environmental Protection Agency, EPA, published provisional estimates of Ireland's greenhouse gas emissions between 1990 and 2010. In 2010 emissions from transport accounted for 14% of all greenhouse gas emissions. After 2007 there was a clear drop-off in the level of emissions from transport which coincided with the switch from taxation based on engine size to CO2 emissions for new cars. In the three years from 2008 to the end of 2010 emissions from transport declined by a cumulative 18%. While there are other factors at play such as the recession, the EPA has stated "changes to vehicle registration tax and road tax introduced in mid-2008" is having an effect on emissions reductions. Rescinding the motor tax incentives and making environmentally conscious motorists bear the burden of tax increases will damage the steady progress Ireland has made in curbing transport emissions. The good work the EPA has noted will be undone by this decision.

Let us look at the impact the Bill will have on the motorist's pocket and the broader issue of transport costs. In a recent Eurobarometer survey of the issues Irish people ranked as the most important facing them personally, cost of living was ranked highest by 44% of respondents. The Bill compounds these concerns for the motorists who purchased low emission cars in the past few years. Motorists in the A band will pay an additional €56, a 53.8% increase; motorists in band B face a €69 increase, a 44.2% increase; motorists in band C will face a 9.3% increase, while those in bands D to G face a 7.5% increase. The choice to buy clean and green has been hit with an increase of €56 and €69 in fees, respectively. This amounts to a breach of trust. How seriously can we take future promises on incentivising environmentally friendly purchases when previous commitments are not honoured?

It would be remiss of me not to place these hikes in the context of broader fuel price increases and rising costs for transport across the board. According to the AA's research, the price of a litre of petrol has gone up by 2.1 cent since last month, while the price of diesel has gone up by 1.3 cent a litre. The AA states a weaker euro and high wholesale fuel costs across Europe are factors in the price hikes. However, it specifically criticises fuel taxes as the major cause of ramping up fuel prices and hitting motorists hard. The cost of petrol has hit €1.60 a litre and is heading towards €1.70 in some stations. Rising fears about the impact of the Iranian oil embargo and the volatile situation in the Middle East, exacerbated by the euro crisis, mean the €2 a litre barrier could potentially be breached.

As the price of oil has broken the $120 a barrel barrier, the need to address fuel costs should be pressing for the Government. Tackling these costs will be vital to ensuring Ireland remains competitive and the domestic economy will have an opportunity to expand. The decline in consumer spending and the erosion of take-home pay are undermining the potential for economic growth. Tackling fundamental transport costs, therefore, cannot be ignored by the Government. The Bill, however, further hits certain motorists in the wallet, with other price hikes resulting from the 2% increase in VAT.

The connection between the rate of tax one pays and the CO2 emissions from one's car was at the heart of the introduction of the CO2 based bands in 2008. It ensured there would be a link in the motorist's mind between driving an environmentally friendly car and paying a low rate of motor tax. This decision erodes that connection. It downgrades the importance of environmentally sound practices at the heart of broader public policy. Specifically, it downgrades the use of taxation to pursue a broader goal, whereby people are given the opportunity to directly respond to monetary incentives. The overarching goal of combating climate change, one of the most serious challenges we face globally, has been neglected by the Government.

Compounded by broader increases in fuel prices, the Bill hits motorists who purchased cars in good faith, in the knowledge that they would enjoy lower costs because their cars formed part of broader efforts to tackle climate change. If the Government takes the issue of climate change seriously, it must take a proactive approach to establishing incentives to shift attitudes and behaviour. Penalising those motorists who responded to such worthwhile efforts is a retrograde step that sets an unfortunate precedent for future public policy. Government efforts will be viewed more sceptically and the response will be more muted than the resounding success of this effort to encourage low CO2 car purchases.

I call on the Government to review its decision, affirm the importance of using public policy to pursue key environmental goals and set out its priorities in establishing real, meaningful incentives in tackling climate change.

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