Paul Bradford (Fine Gael)
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I welcome the Minister of State. May Day on 1 May is generally celebrated across the world as a day for workers and a day on which work and job creation should be at the top of the political agenda. In this country, unfortunately, on 1 May 2010 the Government will introduce a system of carbon taxation which will cost jobs in rural Ireland and will add to the ever-increasing pressure on the farming community. The introduction of the carbon tax will deliver a further body blow to the hard-pressed agricultural sector.

When the Minister for the Environment, Heritage and Local Government announced the carbon budget last December, the only sop to rural Ireland and the farming community in particular was that it would be implemented on 1 May this year and there was hope and the expectation that negotiations could take place and a derogation given, especially for those who use agricultural diesel. This matter was raised during the debates on the Finance Bill in both Houses but it remains the position that on 1 May the price of agricultural diesel will be affected by the introduction of the carbon levy.

We are told the levy will cost the agriculture sector €12 million annually and the economy approximately €300 million. It will be a body blow to economic competitiveness and to competitiveness in rural Ireland and in the agriculture industry. It is significant that while Ireland is rushing to introduce a carbon tax, the French Government has decided to put the introduction of such a tax on hold until broader agreement is reached on it at European level. At the stroke of a ministerial pen in France, French agriculture and industry will be much more competitive relative to industry in this country. The Minister of State, Deputy Connick, comes from the rural constituency of Wexford. He knows the facts and figures about farming and that agriculture has never been under so much pressure across all its sectors. The tillage sector which has suffered significant income losses in recent years will be strongly hit by the imposition of a carbon tax.

The concept of a carbon tax was an easy sell politically for the Government because it was seen as something good from an environmental perspective. All of the measures we introduce must be considered across a range of benchmarks. We should only introduce a carbon tax after serious consideration if it is to add to our cost base, suck in excess of €300 million out of the economy and remove up to €12 million from the agriculture sector. Even at this late stage I hope the Government will be as willing as the French Government to reflect again and consider the wisdom of the introduction of such a tax. We will add to the cost of every litre of agridiesel used the length and breadth of the country. That will impact hugely on the tillage sector and all of the contractors who will be at work during the summer cutting hay and silage. Irish agriculture is under significant pressure and the introduction of a carbon tax will be a tipping point for many farm families and communities.

At a time when approximately 500,000 people are out of work, every piece of legislation we enact, every proposal we bring forward and every regulation we introduce should be benchmarked against whether it will add to the jobs or jobless total. Unfortunately, the introduction of the carbon tax will lead to an increase in the jobless total. It will not lead to the creation of one job but its imposition will significantly add to the number of unemployed because it will increase the cost to industry and agriculture and make the economy less competitive. It will add to our spiralling unemployment tally, something on which we must reflect seriously.

Everyone in the House and across the political spectrum wants to improve the environment. A considerable number of measures can be put in place to achieve this, but the cost of the carbon levy will impact too severely and negatively on rural areas and farm communities. I appeal, therefore, to the Minister of State and his colleagues to reconsider the introduction of the carbon tax. I hope they will take on board the wise course of action of the French Government and put the project on hold until more work has been done across the European Union to introduce a more balanced and fair system of carbon taxation.

Seán Connick (Wexford, Fianna Fail)
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I thank the Senator for raising this matter. I wish to deal for a short time with the issue of climate change and both the European and the national response to what is widely recognised as one of the greatest dilemmas facing mankind. I need not spell out the potential devastation that will ensue for farmers and everyone else should the world not respond in an appropriate way to the need to reduce carbon emissions.

Heads of State and Government of the European Union committed to reduce the Union's collective emissions of greenhouse gases to a level 20% below 1990 emissions levels and they agreed to do so by 2020. An EU burden sharing agreement was drawn up, whereby each member state would adopt an emissions reduction target appropriate to its GDP and capacity to deliver emissions reductions. Under the agreement, Ireland is required to reduce national emissions by 20% compared to 2005 levels by 2020. In the event of a new, international agreement to reduce global emissions, the European Union has further committed to reduce its collective emissions by up to 30% compared to 1990 levels. Each litre of gas oil, whether used in a tractor or a diesel engine car, will generate between 2.7 kg and 3.2 kg of carbon dioxide. In 2007 greenhouse gas emissions associated with the combustion of diesel oil in the agriculture sector were in excess of 800,000 tonnes of CO2 equivalent. The emissions reductions Ireland has agreed will not be achieved without specific measures being put in place to realise them. The introduction of a carbon tax on fossil fuels is one measure designed to encourage such reductions.

The renewed programme for Government emphasised the importance of investment in incentivising the behavioural change that would deliver sustainable development. The programme contained a commitment to introduce a carbon tax in budget 2010. Accordingly, the Finance Bill 2010 introduced carbon taxation of mineral oils. The tax will apply to petrol, autodiesel, kerosene, marked gas oil, liquid petroleum gas, fuel oil and natural gas. These increases which, when VAT is included, amounted to 4.2 cent on a litre of petrol and 4.9 cent on a litre of diesel arose from the application in budget 2010 of a carbon charge on these fuels at a rate equivalent to €15 per tonne of CO2 emitted. It should be recognised that the existing excise duty on marked gas oil, also known as green diesel or agricultural diesel is 4.7 cent per litre. This compares to an excise duty rate of 41 cent per litre in the case of autodiesel, almost ten times higher than agricultural diesel. That is a significant concession that must be borne in mind in this debate.

In introducing the carbon levy the Minister for the Environment, Heritage and Local Government indicated that the principle of carbon pricing was widely accepted as the most effective way to secure emissions reductions. It is the basis of the European Union's emissions trading scheme which applies to the bigger emitters such as power generators and industrial plants. The aim of the tax is to use the increase in cost as a catalyst to effect behavioural change in consumers and thereby cause a subsequent reduction in emissions associated with their consumption of fossil fuels. The tax is a specific rather than an ad valorem tax levied according to the amount of carbon produced by the consumption of a litre of diesel rather than as a percentage of the retail price. Consequently, in terms of achieving its purpose to reduce emissions, a duty levied on an ad valorem basis would not have been appropriate. While it may appear at face value that the price of agricultural diesel has been increased disproportionately compared to that of autodiesel, owing to the difference in the percentage change in price, this is a function of the fact that agricultural diesel has a lower base value owing to the considerably lower level of excise duty on that product.

In terms of the effects on emissions, it is estimated that the carbon levy will reduce emissions in the non-traded sector of the economy by an average of 150,000 tonnes per annum in the period 2008 to 2012. Assuming full implementation of the levy at the rate envisaged, savings in a full year would be of the order of 275,000 tonnes but this saving would not be expected in the first year of implementation. In the case of the agriculture sector, the introduction of the carbon levy on marked gas oil with effect from 1 May will result in an 8.7% increase in its price.

While the agriculture sector generally tends to be more resilient to global economic shocks, this has not been the case in the recent economic downturn. The year 2009 was particularly difficult, as a combination of factors such as the global economic downturn, the weakening of sterling against the euro and lower commodity prices impacted negatively on the sector. Dairy and cereal markets were particularly adversely affected by lower commodity prices. Despite these difficulties, the agrifood sector continues to account for a significant proportion of the economy, including 7.1% of gross value added and 7.8% of employment, and is the primary outlet for the produce and output of the country's 128,000 family farms. The sector exports to 140 markets worldwide. Following the great difficulty in dairy markets last year, prices have improved, but this recovery is fragile. Considerable stocks have been accumulated in EU and US dairy markets and it is very important that these stocks are managed in a way that does not destabilise the recovering market.

An internal analysis by my Department of the direct impact of the carbon levy on the agriculture sector suggests the average increase in the cost of production across all farms will be approximately €230 per farm. There is a considerable degree of variability across the various farm systems. That assumes no change in fuel use by farmers. However, the expectation is farmers, like everyone else, will seek to reduce fuel use and, therefore, reduce costs. That said, I fully appreciate that the imposition of the levy places a considerable burden on farmers, contractors and, in particular, tillage farmers. In an ideal world there would not be any need for such measures, but, as we all know, this world is far from ideal. I intend to closely monitor the implementation of the tax with my Government colleagues to ensure it operates as intended. I also intend to ensure guidance material to inform farmers of how best they can reduce their on-farm energy use, particularly fossil fuel usage, is provided for the widest possible audience.

Paul Bradford (Fine Gael)
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Most farming families would find it very difficult to accept the figure provided by the Minister of State based on the work of the Department which claims the cost per farm will be approximately €230. For tillage farmers and the thousands of contractors, the additional burden will run to thousands of euro, not hundreds.

Even at this late stage, with a view to job creation and maintaining the competitiveness of the economy, including the farming sector, the Minister of State should consider calling on his Government colleagues to reflect and adopt the French wait-and-see approach. I respect his statement that he will monitor the implementation of the tax but on 1 May the additional financial burden on farming families will be very significant. I ask him to make my concerns known to the Ministers for Finance and the Environment, Heritage and Local Government. These concerns are shared by every farmer, contractor and rural organisation. At a time when rural Ireland is under severe pressure, this tax could be a tipping point as far as many families are concerned.