Irish study confirms carbon tax on fuel will hit the poorest insists Laois TD

Leinster Express Reporter


Leinster Express Reporter

carbon tax

New Irish research confirms that more carbon taxes on peat, home heating oil, coal, petrol, diesel and other polluting fuels confirms that poorer households will be worst hit by the extra cost, according to the Laois TD and Sinn Féin's spokesperson on Climate Action and the Environment Brian Stanley.

The Economic Social Research Institute has found that the carbon tax would reduce emissions. It describes the tax as 'regressive' but says its impact on poorer families would be best reversed by helping lower income groups through the tax and welfare system.

Following the publications of the ESRI finding Dep Stanley called for the Government to not introduce any further increase in the carbon tax which would disproportionately hurt poorer households.

He said the ESRI, Ireland's economic think tank, has concluded that poorer households will feel the burden of an increased carbon tax more than the richer households unless the State also introduces a well-designed, effectively managed system to redistribute that tax, supported by an improvement in public transport.

“The ESRI report is clear," said Dep Stanley "any increase in Ireland’s carbon tax will disproportionately hurt working-class families and lower income households unless is it also supported by a whole range of tax measures and improvements in public transport to ensure that they are protected.

“Are we really expected to believe that Fine Gael will to protect lower-income households across Ireland?

“Are we expected to trust the Government that they are going to significantly invest in rural public transport?

“Has the Fine Gael/Independent coalition shown in any way over the last three years that it has the capacity or the ability to introduce a complex and well-designed tax system to support a carbon tax rebate system? The answer is no.

“As a blunt instrument, carbon taxes do not work. Since the introduction of a carbon tax in Ireland in 2010, emissions have actually increased," he said.

He said there are currently 400,000 families living in fuel poverty across Ireland and Sinn Féin would not support any increase in the carbon tax which will see thousands more forced into the cold.

He claimed that the ESRI report states a blunt carbon tax will indeed hurt lower-income households harder’s than wealthier households because they spend a higher proportion of their income on fuel.

The ESRI said researchers in its energy division have found that carbon taxation has an impact on both carbon emissions and on income inequality. Using data from the Household Budget Survey (HBS) and methods to simulate how much people would buy once a carbon tax was applied, they estimate a reduction of carbon emissions by 3.9% for a carbon tax increase of €30 per tonne, and by 10.2% for a carbon tax increase of €80 per tonne.

A statement confirmed the economic impact but also outlined who it could be lessened.

"Poorer households spend a greater proportion of their expenditure on energy, and therefore on carbon tax, than richer households. Carbon taxation is therefore found to be regressive. However, if the revenues raised by the tax are returned to households, the overall negative effect on income distribution can be corrected.

"If every household is allocated an equal share of the revenues from the carbon tax (known as a ‘carbon cheque’), income inequality is reduced by 0.5% and 1% – when compared with the overall income inequality of a no-tax scenario –  for a tax increase of €30 and €80 per tonne respectively. If the revenues are recycled in a manner that targets poorer households, inequality is reduced even more, by 1.2% and 2.8%m," it said.

The reduction in carbon emissions calculated here is based on data from the 2015-2016 HBS. Further reductions in carbon emissions could come from new policy measures, such as congestion charging or improved public transportation. Such measures would influence the degree to which consumers switch from high carbon consumption to lower carbon alternatives.

Commenting on the article, author Miguel Tovar Reaños said: “This research finds that environmental and distributional policy goals are not necessarily in conflict if the policy is designed correctly. Using Irish data, we confirm that carbon taxation is an effective way of reducing carbon emissions, which has been found to be the case in other jurisdictions worldwide. The existing tax and social welfare system is the obvious way to recycle the revenues in a targeted manner. This is also likely to be cheaper to administer than a ‘carbon cheque’. Forthcoming research will discuss how to cycle the revenues through the tax and welfare system for Ireland.”