Denis Naughten (Roscommon-Galway, Independent)
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249. To ask the Minister for Public Expenditure and Reform if he will provide a breakdown of the €70 million from the carbon tax allocated for the ten carbon tax investment programmes and the further €48 million allocated for targeted social protection interventions; the specific impact of the increase in carbon tax on each cohort concerned; and if he will make a statement on the matter. [31644/20]

Michael McGrath (Cork South Central, Fianna Fail)
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I refer the Deputy to the publication on budget.gov.ie of the document "The Use of Carbon Tax Funds 2021". This document describes the revenue that is expected to be raised by the increased carbon tax in 2021 and the allocation of these sums to particular spending programmes.

In summary, the sum of the revenues raised by the continuation of the €6 carbon tax increase announced in Budget 2020 and the additional increase announced in Budget 2021 is estimated at €238m in 2021.

As I noted in my Budget speech, all of these revenues will be returned to citizens. €100m has been allocated to increase the funding for residential and community energy efficiency in 2021. This is an 82% increase in the budget available and means that 2021 will see the largest funding amount ever allocated to these schemes.

€48m has been allocated to part-fund a social protection package of €153.5m allocated to three measures to protect the vulnerable in society from the impacts of the carbon tax. These measures are an increase to the Qualified Child Payment of €2 per week for children under 12 and €5 per week for children over 12, an increase in the Living Alone Allowance of €5 per week and an increase to the Fuel Allowance of €3.50 per week.

This allocation was informed by ESRI research commissioned by the Government to determine whether the carbon tax could be increased in a progressive manner, with impacts on lower-income households and poverty offset through additional spending on social welfare supports.

The ESRI research confirms that interventions of this nature will reverse the regressive impact of the carbon tax and will actually lead to a reduction in overall poverty, particularly child poverty. In fact, the ESRI found that expenditure levels of just €50m - €55m were sufficient to counteract the regressive impact of the carbon tax.

By allocating €153.5m in additional social protection spending, the Government ensures that increase in the carbon tax will actually leave a majority of households better off than they were before the increase in the tax. Analysis undertaken by the Department of Finance using SWITCH, the ESRI tax and benefit model, to simulate the impact of the reforms on households has confirmed this. The analysis suggests that households in the first five income deciles will see increases in their disposable income as a result of these measures.

Budget 2021 also allocated an additional €20m in funding to the agriculture sector. The funds will be used to create an innovative, results-based pilot scheme for farmers who improve the bio-diversity and carbon management of their land by undertaking specific actions which they report directly based on the results generated from their actions. The funds will also contribute to targeting other specific commitments in the Programme for Government, including re-wetting of peat soils and climate and biodiversity training, in measures that will be available to a broad range of farmers.

Finally, €70m in funding has been allocated to continue the 2020 carbon tax investment programme. Budget 2020 announced that ten programmes would benefit from carbon tax funding. These ranged from the creation of a Just Transition Fund, increases in the allocations to greenways and urban cycling programmes and a €2 increase in the Fuel Allowance.

The Government will continue funding these programmes in 2021 to the same level as 2020 using carbon tax revenues, with one exception. The Aggregated Housing Upgrade Scheme was a once-off pilot scheme, which is now being rolled out across the midlands. Accordingly, no additional provision has been made for an expansion of this pilot in 2021, pending the outcome of the pilot scheme.