Paschal Donohoe (Fine Gael)

I welcome the Minister to the House. In my contribution, I want to focus on the role of carbon tax and outline a personal view on its use in Ireland. I am strongly of the view that if one wishes to intervene on an issue such as this, there are two different ways to do it. One is through direct involvement in the different sectors that will be affected and the other is through assessing what we can do with regard to taxation. If we are as serious as we claim about tackling this issue, we will have to find some way to introduce a carbon tax to deal with the behaviour of individuals in regard to it. From my preparation for this contribution, I know a number of other countries in Europe, such as Sweden, Norway and Finland, already have introduced a carbon tax. They have done this in such a way that it does not undermine their competitiveness but makes a difference to their carbon emissions.

To move on to the question of what kind of carbon tax we might have in Ireland and how it would work, the greatest arguments against a carbon tax are that it will undermine the competitiveness of the economy and increase the tax burden on individuals, which for many reasons we are reluctant to consider. The point in the terms of reference of the proposed tax commission is important in this regard, namely, that any carbon tax must be revenue neutral. If we are looking to introduce such a tax, we should also ascertain what change we can make to employer's PRSI to offset any impact on business competitiveness, and to VAT to offset the effect of such a tax on citizens, particularly low income earners.

The only way we will influence the behaviour of individuals is if we engage at the price at which these different forms of energy are available. If particular fossil fuels are priced low in comparison with the alternatives, people will use more of them while they remain cheap. As this use continues, carbon emissions will increase, creating more difficulty with regard to climate change. Carbon taxing will play a role in ensuring we introduce a solution to the issues we face that not only will work but will be permanent and will have an impact on the individual behaviour of our citizens.

I will conclude by considering the role of politics in all this. We must do two things. First, we must provide certainty and clarity in terms of how businesses, organisations and individuals plan their behaviour. If we are telling them what the taxation system will be like in the future and that it will include a degree of carbon taxing, this will allow businesses and individuals to change their behaviour in the way needed. Second, if politics is about anything, it is about having a duty of care and ensuring we leave what we have and what we are responsible for in a better condition than when we inherited it. As such, I believe a measure must be introduced to price carbon in a way that ensures people adjust their behaviour, but this must be done in a way that does not increase the tax burden or undermine our business competitiveness. Revenue raised from carbon taxing should go towards reductions in VAT and employer's PRSI, which is the way we should move forward on this issue.