Mary Hanafin (Dún Laoghaire, Fianna Fail)

I do not propose to accept the recommendation. As previously indicated, the only reliefs from the carbon tax are in respect of those companies within the EU emissions trading scheme, ETS, where a carbon pricing mechanism is already in place. It is not intended to offer reliefs for sectors outside the ETS.

I refer to recommendation No. 20. Those installations within the ETS that use combined heat and power, CHP, technology will be relieved from the carbon tax, subject to payment of the minimum rates required under EU law. However, CHP used outside the ETS will not be relieved from the carbon charge. Notwithstanding this, the Government acknowledges the environmental benefit that can accrue from the use of high efficiency CHP technology and this is why the Finance (No. 2) Act 2008 provided that expenditure on CHP technology is allowable under the scheme of accelerated capital allowances. The scheme allows companies to claim 100% capital allowances on expenditure on certain energy efficient equipment in the year of purchase. Therefore, I do not believe it is appropriate to put in place a further tax subsidy. We must ensure the carbon tax has a broad base and I have no wish to undermine that principle. I point out that a long-term impact of the carbon tax will be to incentivise energy efficient processes such as CHP.

I refer to the remaining three recommendations, which are concerned with a full exemption for mineralogical processes from the carbon charge in the case of gas and coal. The Finance Bill provides that a full exemption would apply to ETS installations in the power generation sector and for consistency with a long-standing policy position, which is the subject of ongoing legal action at EU level, the only other exemption applies to "use for chemical reduction or electrolytic or metallurgical processes". The latter exemption already applies in mineral oil provisions and is being maintained for coal and extended to gas. Not applying the EU minimum rates could raise state aid issues. ETS installations in other sectors will be required to comply with EU minimum rate provisions.

In practice, no additional charge arises in the case of mineral oils, as the existing mineral oil tax rates all satisfy the EU minimum rates and those companies within the ETS continue to pay these minimum rates. However, implications arise in the case of gas and coal because these products have not been taxed up to this point. The carbon tax, therefore, brings gas and coal into the tax net for the first time. Consequently, the EU minimum rate is being applied. In the case of gas, the EU minimum rate is about one sixth of the carbon tax rate, that is, 54 cent per megawatt hour. While the introduction of a carbon tax in respect of coal and the other solid fuels remains subject to a commencement order by the Minister for Finance, when coal becomes subject to the carbon tax, the EU minimum tax rate will apply to ETS installations, that is, €4.18 per tonne which is approximately one ninth of the full rate.

The recommendations in respect of mineralogical processes are not being accepted. However, in the case of solid fuels, the application of the tax is subject to the making of a commencement order. The Minister for Finance and his officials have had meetings with representatives of the sector and propose to continue the discussions prior to a commencement order being made to discuss further their concerns.