Seeing green: carbon tax increases as expected (Budget 2020)

Oct 08, 2019

Carbon tax and related measures to tackle climate change are one of the main features of Budget 2020. The Minister’s plans to boost the economy while reducing environmental impact, although promising, still lack the impetus needed to drive behavioural changes in homes and businesses.

As echoed by the joint Department of Finance and Economic and Social Research Council report, the increase in carbon tax on its own is not sufficient to fully decouple emissions from economic growth. In a step towards a greener Ireland, the Minister has taken a two-pronged approach to combat the issue of climate change – increased carbon taxes combined with targeted tax reliefs.

Increase in carbon tax

The Minister has announced a €6 per tonne increase in the price of carbon, with an intention to increase this steadily to meet the target of €80 per tonne by 2030. This increase will apply from 9 October 2019 to petrol and diesel; however, the increase to other fuels is being delayed until May 2020, until after the winter home-heating season. Though this might leave you feeling warm and fuzzy, the increase is expected to add approximately 2 cents to a litre of petrol or diesel, equivalent to an increase of approximately €36 per annum in fuel costs for the average driver.

The projected €90 million set to be raised in 2020 from this increase will be ring-fenced to fund new carbon action measures.

Impacted communities prioritised

Almost one-third of the ring-fenced funds will go towards assisting communities adversely effected by the winding down of local carbon industries. An additional €20 million will be spent on energy efficiency installations in social housing, €5 million on peatland rehabilitation and €6 million on the creation of a new Just Transition Fund. A new Just Transition Commissioner will also be appointed to oversee the workings of this fund.

Additionally, €13 million for the Warmer Homes scheme is being allocated to provide free energy efficiency upgrades to households deemed to be in, or at risk of, energy poverty.

Driving the change

The 2020 transport budget is also being boosted by an additional €384 million to allow for extended investment in public transport, including the Rural Transport scheme, greenways and urban cycle routes.

With an increase in transport and logistical costs an expected by-product of Brexit, Budget 2020 also makes room for providing additional relief to hauliers through the existing Diesel Rebate scheme to compensate that sector for the increased cost of fuel.