Ossian Smyth (Dún Laoghaire, Green Party) | Oireachtas source

-----and massive increases including in the fuel allowance and the living alone allowance, and so on. He knows that those payments have been introduced. He knows that it is part of a package. He is also aware that carbon tax has to be there. He shows that in the purest way that he can, by retaining it in his party's alternative budget and paying for its programme with carbon tax. I am glad to see that.

I want to stress that the Government is acutely aware of the pressures being faced by households in light of the inflationary trend in energy prices. The current trend in energy prices are not unique to Ireland. They are, in fact, part of the global trend. The final retail price of fuel is determined by a number of factors, including the cost of production, distribution, global market factors, international exchange rates, taxation, wholesale market contracts, as well as individual retail pricing policies. If the price of home heating oil has gone up by 50%, is the Deputy really putting forward the idea that that is the result of carbon tax? It is not. His solution of cutting carbon tax by 2% is not going to work; it is not the answer. Demand for oil and other energy products, such as natural gas, has increased sharply following the reopening of many economies in the second half of last year. Currently, the wholesale price of oil is broadly in line with the average pre-pandemic prices. However, the level is much higher than the abnormal levels that prevailed during the first wave of the pandemic. That boosted the annual comparison. Additionally, the increase in international gas prices is more complex and relates to increased demand from certain parts of the world, in part as a result of extreme weather events, lower than expected gas supply and low gas reserves. Unfortunately, Ireland, along with the rest of the EU, is a net importer of gas, and as a result, is a price-taker on international markets. More broadly, energy prices globally have also risen due to rising geopolitical tensions. I do not need to explain to the House the fragile political situation that exists to the east of us. That has had, and is having, an impact on prices paid by consumers in Ireland. However, while this is a global issue, the Government is very aware that this is of little consolation to Irish businesses and households who are feeling the financial impacts of rising prices. In the long run, the best way to protect Ireland from the impact of international fossil fuel prices is to reduce our dependence on them. We will achieve this through the progressive decarbonisation of society and through the steps that will be taken to meet the Government commitment to reach net-zero greenhouse gas emissions by 2050.

Ireland's taxation of fuel is based on EU law, as set out in the European tax directive, ETD. The ETD prescribes minimum tax rates for fuel which all member states must comply with. Ireland applies excise duty in the form of mineral oil tax to fuels used for motor or heating purposes. Mineral oil tax comprises a non-carbon and a carbon component. The carbon component is also referred to as the carbon tax. Deputies will be aware that the 2020 programme for Government committed to increasing the amount that is charged per tonne of CO2 to €100 by 2030. The Minister of Finance followed through on this commitment by introducing a measure in the Finance Act 2020 to provide for a ten-year trajectory for carbon tax increases to reach €100 per tonne of CO2 by 2030. This measure is a key pillar underpinning the Government climate action plan to halve emissions by 2030 and to reach net zero by no later than 2050. For context, it must also be noted that changes to carbon tax rates are having a relatively small impact on current energy prices. The budget 2022 carbon tax increase, which came into effect in October 2021, added approximately 2 cent per litre in tax to petrol and 2.5 cent per litre to diesel. The increase in rates for home heating fuels, such as kerosene, gas and solid fuels, was delayed until 1 May 2022 to mitigate against the impact during the winter heating season. It is clear that the carbon tax is not the cause of the current energy price inflation. Delaying the carbon tax increase will do little to ease the pressure that people are under. It is important to point out that a key element of the Government's carbon taxation policy is the hypothecation, or ring-fencing, of revenues. This is to put the funds that have been raised into just transition measures. The money raised is ring-fenced so that it goes back into people's pockets to help them reduce their fuel bills. This is done through compensating those on low incomes to prevent fuel poverty and to ensure a just transition for displaced workers and through financing climate-related investment, particularly in the area of agriculture and supporting farm families.

A specific portion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy efficiency measures that not only support the most vulnerable households in society, but also, in the long term, provide support against fuel price impacts by reducing our reliance on fossil fuels. To this end, the Minister for the Environment, Climate and Communications recently announced an ambitious national retrofitting programme that will slash the cost of energy-proofing people's homes. This is the type of long-term solution we need. It will result in warmer homes and lower bills for 40 years, not just the year ahead. However, people also need support now.

I will turn to the Government's response to the recent spike in energy prices. Of course, the Government is acutely aware of the increase in consumer prices in recent months, especially the increase in fuel and other energy prices. For this reason, we designed a package of measures to alleviate the impact of increased energy prices on households. In designing a support package, the Government was conscious of the need to target high energy prices as the main underlying programme while operating within the fiscal framework set out in the summer economic statement of 2021. The suite of measures was announced this month, and strikes the appropriate balance. This package provides support for every household via the electricity credit, but also provides specific supports for more vulnerable households through targeted welfare measures. The package of measures worth €505 million includes an increase in the energy credit of €200, including VAT, estimated to impact just over 2 million households. That will be paid in April. A lump-sum payment of €125 on the fuel allowance will be paid in early March to 390,000 recipients. To reduce the burden on people returning to the workplace and people using public transport, there will be a temporary reduction in fares of 20% from the end of April until the end of the year. This will impact approximately 800,000 daily users. The original Sláintecare report proposed a reduction in the monthly threshold for the drugs payment scheme from €144 to €100. The Government has decided to reduce this further from €100 to €80. This will benefit just over 70,000 families. The working family payment budget increase announced on budget day will be brought forward from 1 June to 1 April, and there are reduced caps for multiple children on school transport fees to €500 per family at post-primary level and €150 for primary school children. The package of measures comes on top of measures announced in budget 2022. In formulating budget 2022, the Government carefully considered the cost-of-living pressures confronting households. For this reason, it contained a large range of measures to protect households from the rising cost of living.

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