Denis Naughten (Roscommon-Galway, Independent) | Oireachtas source

I was saddened to witness the political football being created from the matter of air quality. One in five children in this country suffer from asthma and one in 14 adults in the country suffer from chronic obstructive pulmonary disease, COPD. Before Covid-19, COPD was responsible for 10% of all hospital admissions. The Minister for the Environment, Climate and Communications, Deputy Eamon Ryan, has handled this matter terribly but peat has been in the cross hairs in the air quality debate for more than five years, and nobody should be surprised by that. The current Taoiseach, when on the Opposition benches, called for action in the area.

The reality is that the practice of burning turf is dying a natural death and the current approach will only lead to a reversal of its natural rate of decline. If we are serious about taking turf out of the system, we must fast-track the retrofitting of homes. That was started back in 2018 and then the brakes were put on; it will only recommence in earnest next year or five years after the retrofitting of those houses commenced. That is where the Government focus and priority should be if it wants to deal with air quality issues in provincial towns and rural areas.

I will focus on the question of carbon taxes. These are supposed to be an environmentally focused tax to drive behavioural change in the use of fossil fuels. In such circumstances, the most effective tax is the one bringing in little revenue because it is doing what it should, which is to drive behavioural change. The focus of an environmentally focused tax should never be on revenue but rather on motivating that behavioural change. The current carbon tax model is flawed in this regard because, I am sad to say, the goal is to bring in more revenue rather than trying to drive behavioural change. Instead, the focus is on replacing existing spending lines across government.

If we are serious about moving away from our dependence on fossil fuels, we need a model of carbon tax that is fluid. Last month there were media reports that the Government was looking at introducing a swing mechanism on fossil fuel taxes to address oil price volatility. It now seems, however, that the Government has shelved that proposal and nobody is prepared to explain why it has been taken off the table. The reality is we need a taxation model that takes into consideration the ever-changing cost of a barrel of oil. Carbon taxes should vary with the cost of a barrel of oil because even if carbon taxes increase significantly but the price of oil collapses, the type of step change we require will not be realised.

For example, over a decade ago it was believed the carbon taxes that were then introduced would drive the type of change needed to decarbonise our economies. That was based on a projected increase in the price of a barrel of oil before shale fracking technology and other factors distorted the market. The price of Brent crude oil went from $114 per barrel in June 2014 to just $20 per barrel in January 2016, which undermined that entire policy tool. At the opposite end of the spectrum, when the price of a barrel of oil increases sharply, there is a direct impact on the cost of living for families, as well as having a devastating impact on a small, open economy like ours. We are seeing that impact today because Ireland is more exposed than most EU countries to oil price volatility.

I have raised this specific matter with the Minister for Finance, Deputy Donohoe, on numerous occasions. His response on the introduction of a more flexible approach to carbon taxes was that the model would undermine the revenue generated from carbon taxes, and the revenue is used to fund the type of retrofitting proposals I have already mentioned. The reality is that families now have to decide whether to put food on the table or buy fuel to heat their homes because of this approach to Government taxation, which is about taxing the vulnerable and poor to pay for the retrofitting of homes across this country. The solution is to ring-fence the additional unplanned VAT revenue generated from the inflated fuel prices to replace the lost revenue from carbon tax income. It would ensure people would not have to pay excessive carbon taxes when the price of fossil fuels increases. At the same time it would secure revenue to carry out the retrofitting of homes.

This would be a similar approach to what happens with the public service obligation, PSO, in the electricity generation sector, which moves up and down and varies with the price of electricity on an annual basis. The only difficulty is the Government is introducing a three-card trick with the PSO. It announced with great fanfare that the PSO would be reduced to zero from October but it failed to say that people are now paying a PSO levy that is no longer required but must wait until next October to get the money back. The PSO should be stopped today.

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