January 25 th, 2017 Brussels, Belgium Carbon Tax the Irish case James Nix, Director of Green Budget Europe 1
Context Leadership by the Green Party Limited public opposition Government need for the income Support for a green economy Support from the academic and wider policy community Doesn t include the main business and farming opponents Effective engagement and good planning 2
Features of the Irish Carbon Tax The tax applied to CO 2 emissions from certain non ETS sectors (e.g. transport fuels, and energy but not agriculture): 2009: Transport fuels (petrol and auto diesel) 2010: Non transport fuels (kerosene, marked gas oil, fuel oil, LPG and Natural Gas) 2013: Solid fuels (Coal and commercial peat) Methane, wood and nitrous oxide emissions are not taxed. Exemptions for the agriculture sector are put in place. The rate started at 15 per tonne of carbon dioxide in 2010 and 2011; later in 2013 it was extended to additional fuels (e.g. coal) and increased to 20 per tonne. 3
Features of the Irish Carbon Tax Ireland s carbon tax is an upstream tax it is therefore applied to upstream suppliers of coal, at natural gas processing facilities, and at oil refineries: e.g. included in the price at the gas station Retailers collect VAT and excise duties already, and can collect the carbon tax as well without additional administrative burden Fuel Type Unit Pre tax price in December 2012, EUR Carbon tax increase (including VAT) EUR % change in price Petrol Litre 1.503 0.056 3.7% Auto diesel Litre 1.454 0.065 4.5% Kerosene 1 000 litres 880 57.54 6.5% Marked Gas Oil 1 000 litres 920 62.45 6.8% LPG 1 000 litres 900 37.30 4.1% Natural Gas 107 kilocalories GCV 0.068 0.004 5.9% Coal/Peat Tonne 365 59.80 16% Peat Bale 3.9 0.52 13% 4
Emissions vs. GDP (Non ETS, excl agri) 30000 180 160 Commercial/ Public Services 25000 140 Transport 20000 120 ('000) CO 2 emissions 15000 100 80 Billion Residential (not electricity) 10000 60 Non ETS Industry 40 5000 20 0 2005 2006 2007 2008 2009 2010 2011 2012 0 Real GDP billion (base yr 2010) 5
Residential CO 2 emissions per fuel type per year, not including electricity (1 000 tonnes of CO 2 ) CO 2 from the transport sector (1 000 tonnes of CO 2 ) 8000 16000 7000 natural gas 14000 ('000) CO2 tonnes 6000 5000 4000 3000 Petroleum coke gas oil/diesel lpg Kerosene ('00) CO2 tonnes 12000 10000 8000 6000 Gasoil/D iesel Lpg Fueloil 2000 Peat 4000 1000 0 2006 2007 2008 2009 2010 2011 2012 Coal 2000 0 2006 2007 2008 2009 2010 2011 2012 2013* Gasoline (unleade d) 2500 Industry emissions per fuel type per year, not including electricity (1 000 tonnes of CO 2 ) Gasoil/Diesel HFO Kerosene LPG Refinery Gas Pet Coke Milled Peat ('000) CO2 tonnes 2000 1500 1000 500 Natural Gas 0 2005 2006 2007 2008 2009 2010 2011 2012 6
Revenues 418 meur of revenues in 2015 Equivalent to 2,2% of tax receipts in 2015 7
Equity Impact of a 20 per tonne CO 2 carbon tax per income decile. Prior to the introduction of the carbon tax in 2010 there were a number of schemes in place to tackle fuel and energy poverty of low income householders. According to the Government, The key priority will be to fund further sustainable energy programmes. The yield from the Carbon Tax will be used to boost energy efficiency, to support rural transport and to alleviate fuel poverty. The Carbon Tax will also allow us to maintain or reduce payroll taxes As anticipated, costs for fuel related assistance in Ireland indeed increased since the introduction of the tax and the Department of Social Protection took action to reduce it. 8
Competitiveness Given that taxes had to be raised somehow, it seems plausible that the negative economic impact in terms of jobs and employment would have been more severe if, instead of the carbon tax, income taxes had been raised further, albeit by only 2.5%. OECD (2009) concludes: A revenue neutral growth oriented tax reform would be to shift part of the revenue base from income taxes to less distortive taxes such as recurrent taxes on immovable property or consumption. 9
Other Environmental taxes in Ireland Transport taxation (VRT and annual taxes based on emissions, taxes on fuels) Buildings Energy programmes (Energy rating, Smart metering programmes, ) Landfill tax ( 75 per tonne goes to Environmental Fund ) Waste charges (pay as you throw) Water charges coming in 2014 Plastic bag levy (22 cents per bag, usage dropped from 1 billion to 85 million in 1 st year) 10