Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I thank the Senators for giving me an opportunity to address this issue and thank them for their concern. The carbon tax on fossil fuels was introduced in budget 2010. It was applied to petrol and auto diesel from December 2009 and extended to kerosene, marked gas oil, liquid petroleum gas and natural gas with effect from May 2010.

The carbon tax on fossil fuels was introduced in budget 2010 and applied to petrol and auto diesel from December 2009 and extended to kerosene, marked gas oil, liquid petroleum gas and natural gas with effect from May 2010. At the time, the application of carbon tax to solid fuels was made subject to a commencement order. This approach in respect of solid fuels was primarily adopted in order to allow time for a robust mechanism to be put in place to address the risk of coal products with lower environmental standards being sourced from outside the State. The Department of the Environment, Community and Local Government undertook to provide such a robust mechanism in conjunction with the National Standards Authority of Ireland, NSAI. As part of that exercise, the Department engaged in a consultation process involving officials from the Department of Finance, the Revenue Commissioners, the industry representative Solid Fuel Trade Group, SFTG, the Environmental Protection Agency and representatives of selected local authorities.

The Minister for the Environment, Community and Local Government introduced a new specification for the sulphur content of bituminous coal placed on the market for residential use in Ireland with effect from 7 June 2011. This created the circumstances to facilitate the application of carbon tax to coal and peat. However, in budget 2012, given other tax increases, particularly with regard to VAT which increased from 21% to 23%, the Minister decided not to commence the order for the carbon tax on solid fuels. In budget 2013 the carbon tax was extended to solid fuels but conscious of the greater reliance of low-income households on solid fuels, the Minister postponed the application of the tax until after the winter period and decided to introduce it in two phases, that is, €10 per tonne of CO2 from 1 May 2013 and a further €10 per tonne of CO2 from 1 May 2014. This will mean an increase in price of those fuels of approximately €1.20, or 8.2%, per 40 kg bag in the case of coal and 26 cents, or 6.7%, in the case of a bale of briquettes this year. The relatively high percentage increase in the price of these products is due in part to those products having little or no excise applied to them prior to the carbon tax.

The introduction of carbon tax was about sending a price signal that there is a cost associated with the consumption of fossil fuels to the detriment of the environment. In practical terms, the tax is applied according to the carbon content of those fossil fuels. The greater the amount of CO2 emitted, the higher the tax. It should be noted that solid fuels have the highest carbon content of all fossil fuels. As a result they are considered the dirtiest fuels and, given the environmental impact, it is important that they are taxed. While tax increases are unpopular, where a country's financial position is under pressure it makes sense to increase taxes in areas where some benefits can arise. In this case, a carbon tax promotes energy efficiency, reduces emissions and reduces our dependence on imported fossil fuels. Given that the extension of the carbon tax to solid fuels was part of the overall revenue raising measures in budget 2013, the Minister is not in a position to review this decision.