Joe O'Brien (Dublin Fingal, Green Party) | Oireachtas source

I move amendment No. 1:

To delete all words after "That Dáil Éireann" and substitute the following: "notes that:

— the carbon tax is not behind the current spike in energy prices as the annual rate of consumer price inflation, as measured by the European Union's (EU) Harmonised Index of Consumer Prices, picked up sharply over the course of last year, and stood at 6.9 per cent in March - the highest reading since the series began in 1997;

— the key driver of this increase is increases in wholesale energy prices as a result of the rapid rebound in global demand and, more recently, the war in Ukraine;

— in this context changes to carbon tax rates are having a relatively small impact on current energy prices, with the Budget 2022 carbon tax increase, which came into effect in October last year, adding approximately 2 cents per litre in tax to petrol and diesel;

— the increase in rates for home heating fuels such as kerosene, gas, and solid fuels was delayed until 1st May, 2022, to mitigate against impacts during the winter heating season, and the May 2022 increase will add approximately €21.56 to a 1,000-litre fill of kerosene and 20 cents (VAT inclusive) to a 12.5 kilogram bale of briquettes;

— many of the drivers of current inflationary pressures are global in nature, and therefore Government policy is limited in what it can do to mitigate these trends;

— the Government has nonetheless taken significant action in this regard, Budget 2022 contained a large range of measures to protect households from the rising cost of living including a personal income tax package worth €520 million and a social welfare package of over €550 million;

— there was an increase in the weekly rate of the Fuel Allowance by €5 to €33 a week so that €914 was paid to eligible households over the course of the winter and an additional lump-sum payment of €125 was paid to the 370,000 households receiving the Fuel Allowance in mid-March 2022, with a further €100 again to be paid in April;

— a further package of measures, to the value of €320 million, was introduced with effect from 10th March, reducing the excise duty on petrol, diesel and Marked Gas Oil (MGO) by 20, 15 and 2 cent per litre respectively, and these measures are being extended to 12th October, 2022, with an additional 3 cent reduction for MGO, costing €97 million;

— VAT will be reduced from 13.5 per cent to 9 per cent on gas and electricity bills from the start of May until the end of October, costing €46 million, and there will also be a reduction in the Public Service Obligation (PSO) levy to zero by October 2022;

— from April all residential electricity customers will see the Electricity Costs Emergency Benefit Payment of €200 (including Value Added Tax (VAT)) credited to their accounts; and

— these measures more than offset the increased costs associated with the carbon tax increase; and

recognises that:

— carbon tax is a key pillar underpinning the Government's Climate Action Plan to halve emissions by 2030, and reach net zero no later than 2050;

— the Programme for Government: Our Shared Future committed to increasing carbon tax and the Finance Act 2020 provides for a 10-year trajectory for carbon tax increases to reach €100 per tonne of carbon dioxide (CO₂) by 2030;

— a significant portion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy efficiency measures, which 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;

— previous analysis undertaken using SWITCH, the Economic & Social Research Institute tax and benefit model, to simulate the impact of the carbon tax increase and the compensatory welfare package has confirmed that the net impact of the combined measures is progressive and households in the bottom four income deciles will see all of the cost of the carbon tax increase offset, with the bottom three deciles being better off as a result of these measures;

— 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, and we will achieve this through the progressive decarbonisation of Irish society and through the steps that will be taken to meet the Government's commitment to reach net zero greenhouse gas emissions by 2050; and

— furthermore, recent analysis undertaken by the Department of Finance using SWITCH has confirmed that the suite of recently announced measures more than offset the carbon tax increases for all income deciles, with the following measures being included in the analysis:

— the lump-sum increase in the Fuel Allowance of €100;

— a cut in the VAT rate on gas and electricity from 13.5 to 9 per cent;

— a reduction in the PSO levy of €58.57 annually; and

— an extension of the cut in excise duty of 15 cent for diesel and 20 cent for petrol from 31st August, 2022, to the Budget Day in October; and

— overall, in net terms, all households see increases in disposable income, with lower income households seeing the greatest proportional gains, reflecting the progressive nature of the measures.

On behalf of the Minister for Finance, I welcome the opportunity to discuss the Private Members' Motion tabled by the Rural Independent Group calling, among other things, on the Government to scrap the carbon tax in its entirety. The Government proposes to reject this motion. Carbon tax is a key pillar underpinning the Government's aim under the climate action plan to halve emissions by 2030 and reach net zero no later than 2050. A further key component of the Government's carbon taxation policy is the use of revenues raised from these rate increases to fund important just transition measures. It is important to note that a significant proportion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy-efficiency measures, which 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.

The motion calls on the Government to recognise that a climate change strategy should harness the full potential of new and emerging technologies. This is precisely what the Government is trying to achieve through the use of carbon tax funds particularly in retrofitting and new agricultural policies. The motion also asks for a financial impact analysis on households and society. This has already been done. Analysis undertaken using the ESRI's tax and benefit model, SWITCH, to simulate the impact of the carbon tax increase and the compensatory welfare package has confirmed that the net impact of the combined measures is progressive. Households in the bottom four income deciles will see all the costs of the carbon tax increase offset, with the bottom three deciles being better off as a result of these measures. This is the financial impact. 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 Irish society and through the steps that will be taken to meet the Government's commitment to reach net zero greenhouse gas emissions by 2050.

The context for the recent conversations we are having on carbon tax is the pressure being brought about by the global rise in fuel costs. More recently as a result of the ongoing war in Ukraine and Russia's role in global energy supply, oil and gas prices have risen further and these increases will feed into higher inflation over the coming months. The energy market has been impacted by these global trends across the board. The fossil fuels we rely on for home heating have been subject to significant price increases. The final retail price of fuel is determined by a number of factors, including the costs of production, distribution, global market factors, international exchange rates, taxation, wholesale market contracts as well as individual retail pricing policies. In this context, it should be noted that changes to carbon tax rates are only having a relatively small impact on current energy prices.

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