Terry Brennan (Fine Gael)
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Cuirim fáilte roimh an Aire go dtí an Seanad. This matter is local to County Louth. Standard Brands of Kilsaran, Castlebellingham, County Louth, has been manufacturing firelighters since the early 1970s and employs approximately 100 people. It also manufactures firelogs - logs which were previously imported from Holland and Germany. Imported products contain hardwood dust, waste wood dust and various other elements, while petroleum coke dust and natural waxes are contained in the firelog manufactured by Standard Brands. I understand imported products will not be liable for carbon tax, which will lead to retailers' switching to the imported product, with the possibility of job losses at Kilsaran, Castlebellingham.

The Revenue Commissioners are calling instant firelogs a solid fuel. However, the National Standards Authority of Ireland told Standard Brands verbally that it does not class firelogs as a solid fuel but as a source of ignition akin to a firelighter, to which carbon tax will not apply. There is no doubt the retailer will chose the cheaper product to put on the shelf. Introducing a carbon tax on instant firelogs made in Ireland will make them uncompetitive compared to European imports, which will result in a reduction in the workforce at Standard Brands. I am not sure what the logs are made of, but they are used one at a time. The wrapper is lit and then solid fuel, such as coal or timber, is added to the fire. They are not used like a shovel of coal or a number of briquettes but are used one at a time. I implore the Minister to reconsider the issue of carbon taxes on firelogs made at Standard Brands.

John Kelly (Labour)
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I welcome the Minister of State. Like Senator Brennan, I am concerned about the imposition of this carbon tax on solid fuel from the point of view of potential job losses. I have been approached by suppliers of coal who have told me that what will happen, as happens in hard times, is that people will source their coal somewhere else - most likely from Northern Ireland, where the VAT rate on coal is only 5%, as distinct from 13.5% in the South. Unfortunately, the sulphur content of the coal in the North is 2%, whereas in the South it is 0.7%, so we will lose jobs, lose money to Northern Ireland and damage our environment even more with the use of this coal.

The Minister must accept that this has been one of the coldest winters in living memory and evidence of that is the current fodder crisis. If this carbon tax had been introduced this winter, I would have paid more in carbon tax than in property tax. We must also be conscious of the fact that we spend €211 million on the free fuel allowance every year. Will we lose that revenue North of the Border because coal will be cheaper there? We got a rebate on diesel costs, for which I campaigned for a long time, and we saw how effective that was. The economy was losing millions of euro because hauliers were going to Europe with one quarter of a tank of diesel to fill up there. We had to address that by introducing a diesel rebate. We need to look at how we are dealing with this carbon tax in the same way, as jobs will be lost. Sometimes we make decisions that backfire, and it would be extremely wise to revisit this one because otherwise we will learn the hard way.

Brian Hayes (Dublin South West, Fine Gael)
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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.

Terry Brennan (Fine Gael)
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Why are firelogs described as a solid fuel? The legislation states that coal is defined as "coal and lignite, solid fuel manufactured from coal and lignite" and any other energy product within the meaning of Article 2.1 of the directive in solid form. Standard Brands log is solid and comprises material included in the energy product list, but it is not a fuel similar to coal and briquettes. It is not a fuel. One match lights it and it contributes to the fire. One uses one per day. In fact, the wrapper states not to use any more than one. I have the pack instructions with me.

Consumer research also shows that more than 80% of individuals in Ireland who buy firelogs use them as a large firelighter. There is no carbon tax applied to firelighters. Perhaps the word "log" will cause additional carbon tax for this manufacturer, Standard Brands. It will also increase the VAT and make its product uncompetitive with imported substitutes. I am also fearful for the 100 people working locally. If one loses nine or ten of them, one loses 10% of one's workforce. This must be considered. It is a glorified firelighter and that should be considered.

John Kelly (Labour)
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The Minister said in his response that there is a cost associated with the consumption of fossil fuels to the detriment of the environment. I have already covered that. If people are travelling to the North to buy coal containing 1.3% extra sulphur, it will surely be to the detriment of our environment and we will also lose revenue. There is no alternative for people who are hard pressed at present.

The Minister of State said the Minister is not in a position to review it. I hope the Minister will convey Senator Brennan's and my concerns to him. They were not addressed in the reply. Perhaps it is our own fault for not making it clearer in the question.

Terry Brennan (Fine Gael)
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We should have been more specific. That is our fault, nor the fault of the Minister of State.

John Kelly (Labour)
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The issue here is that we might lose jobs. We must keep this under review. If we are going to lose jobs in this sector, it is not worth the revenue that will be raised. I hope the Minister of State will convey those concerns to the Minister.

Brian Hayes (Dublin South West, Fine Gael)
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I will speak to the Minister, Deputy Noonan, and raise the substantive issue the Senators have raised with him. There is a general issue with these Adjournment matters. If Members are not specific about the point, they will receive a general reply.

Terry Brennan (Fine Gael)
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We appreciate that.

Brian Hayes (Dublin South West, Fine Gael)
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I know from my years of experience in the House that the clearer the Member is in the matter tabled, the easier it is for the officials in the Department to know what they are seeking. That is the first point.

John Kelly (Labour)
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One would have to write an essay to be specific on occasions.

Brian Hayes (Dublin South West, Fine Gael)
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The Senator can give me a shout. I might be a help in that regard.

With regard to the firelog, which Senator Brennan describes as a glorified firelighter, I do not wish to shunt responsibility to the Department of the Environment, Community and Local Government but my understanding is that the specification of what is and is not fossil fuel and what is and is not a by-product came from that Department following an extensive consultation with industry representatives. As to why the firelog is included for the purposes of the carbon tax, the Senator makes a fair point. However, from our perspective on the finances side, we simply implemented that which came from the Department of the Environment, Community and Local Government. Without shedding responsibility, in fairness it is probably a more specific issue for that Department.

On the second issue raised by Senator Kelly, I appreciate his point. The Minister, Deputy Noonan, made it clear in his Budget Statement that there is a phased introduction of this carbon tax over a period of two years. The reason for doing this is that those fossil fuels have the most carbon content and if one is trying to change patterns of behaviour it is a long-standing practice that taxation instruments provided for in every Finance Bill can be used for that purpose. In any event, we will have to look at all of the evidence that will flow from this. The Senators have raised this in May and it was only applied from yesterday, so it is a timely issue. Of course, we will continue to examine the implementation of this. That there will be truck loads of people heading to the North to bring coal back across the Border is something we would have to consider should it happen.

The tax is in place from 1 May and there will be another increase on 1 May next year. We will keep a close eye on this from the financial perspective. Projections have been made for this tax from our national financial perspective in terms of the profiling of the amounts to be obtained from this. It is an issue of direct relevance because if we say we will obtain money from a tax, it is important that we obtain it. Obviously, therefore, this matter will be kept under constant review. However, I will convey the issues the Senators raised to the Minister.