Conor McGuinness (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

45. To ask the Minister for Finance if any impact study is carried out by his Department ahead of carbon taxes increases to adjudge the financial impact on householders, including those in or at risk of poverty and isolation. [4188/25]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

In 2020, the Economic and Social Research Institute (ESRI) was commissioned to examine the options available to offset the impacts of a carbon tax increase on low-income households. The resulting ESRI research paper, “Carbon Taxes, Poverty and Compensation Options” acknowledges that the impact of a carbon tax increase is not distributed across households evenly. Lower income households spend a higher proportion of household income on energy costs, particularly on heating the home. However, the ESRI research concluded that poverty can in fact be reduced and the lowest-income fifth of households left better-off by using a third of revenues from a carbon tax rise on targeted increases in welfare payments

In light of the ESRI research and the Government commitment to ensure that the carbon tax is fair and equitable, successive Budgets have provided for targeted increases in welfare payments to protect those most vulnerable to fuel poverty.

Budget 2025 provides for a €951 million allocation toward this end, an additional €163 million on the 2024 allocation. This funding provides €306 million of Carbon Tax revenues for the Department of Social Protection for targeted social welfare interventions; and €477 million to the Department of the Environment, Climate and Communications for retrofitting, just transition, and Official Development Assistance (ODA); as well as funding for other Departments’ initiatives.

Analysis undertaken using SWITCH, the ESRI tax and benefit model, to simulate the impact of the carbon tax increase and the compensatory welfare package in Budget 2025 estimates that the net impact of the combined measures is progressive. Specifically, the analysis finds that households in the bottom five income deciles are materially better off as a result of the social protection measures funded by the increased carbon tax.