What should the Irish government do about carbon pricing?

The Irish government was strongly criticised for its failure to increase the carbon tax in the last Budget. At the same time, the ‘Gilets Jaunes’ movement in France has highlighted the key role that fossil fuel currently plays in the economy, and the fact that a badly-managed increase in fuel tax could trigger a very strong negative reaction.

In Ireland, the Joint Oireachtas Committee on Climate Action is preparing a set of recommendations that it will present to the Dail on January 31st. There is much discussion at present of the possibility of introducing a ‘Fee and Dividend’/‘Carbon Cheques’ system whereby some or all of the revenue from a carbon fee or tax would be redistributed to Irish residents.

Feasta’s climate group made a submission to the Committee on January 17 2019. Below is a slightly edited version:

Feasta climate group members, who have been advocating a ‘carbon cheques’-based emissions reduction programme for the past thirteen years, welcome the news that such a programme is currently being considered by Irish policymakers.

Below we briefly list our own priorities in advocating carbon pricing, along with some specifications that we believe to be necessary to ensure the programme’s effectiveness.

1. Priorities of carbon pricing programme:

– Helping to achieve a gradual phase-out of emissions from fossil fuel use in Ireland in the course of the next three decades, in line with the Paris Agreement

and (of equal importance)

– Ensuring that the vulnerable are not adversely affected by the renewable energy transition

2 Specifications

2.1 100% dividend distribution

We share the view expressed by representatives of several other Irish environmental NGOs that the revenue from a carbon fee should be distributed on a 100% per-capita basis (‘fee and dividend’/‘carbon cheques’), as this would ensure that those who pollute less, and who tend to be worse off financially, would benefit. The cheques could potentially ward off the kind of tension that has recently occurred in France, where a large portion of the revenue from an unpopular fuel tax was simply added to a general fund.

2.2 Combine the carbon fee with supply-side measures to phase out fossil fuels
Given the existential threat that climate change poses, we urge the Committee to consider implementing a quota-based system for managing fossil fuel supply in Ireland (sometimes referred to as a “hard cap”)(i).

Our belief that quotas are a necessary complement to a carbon fee derives from other countries’ experience with carbon taxes. A slump in the overall fossil fuel price can spur an increase in emissions even where there is a relatively high carbon tax(ii). Moreover, in a system without quotas, wealthy climate skeptics can continue to purchase and use as much fossil fuel as they wish, since they have the means to do so.

While one can attempt to offset the effects of a slump in fossil fuel price by increasing the carbon fee level, this requires a certain amount of guesswork as to what level of price increase is likely to trigger the ‘correct’ emissions reduction, and would necessarily be reactive. Given the extreme risk we are facing with regard to the climate and the relatively short time-frame which we have in which to act – and the noticeable failure so far to actually achieve significant emissions reductions – we believe that a more direct policy instrument is necessary.

Imposing an absolute limit on fossil fuel imports and production would guarantee that the first goal listed above, of reducing and eventually eliminating emissions from fossil fuel, would be met. It would not be administratively daunting, as most fossil fuel originates from a handful of producers and its production and/or importation is already well-monitored.

A quota system could (and should) include a production or import permit fee – ensuring that price would still play an important role in the energy transition, but would not bear the bulk of responsibility for it. Such a fee could have a set or maximum price (which could, for example, be in line with the carbon price recommended by An Taisce and the Environmental Pillar) so as to deter abrupt increases in fuel prices.

2.3 Protecting the vulnerable and promoting climate justice

A carefully-designed carbon pricing programme should have justice and equity built into it right from the start. One approach could be to establish a “climate justice partnership” between Ireland and a Global South country(iii). This would take into account the fact that the atmosphere is our collective responsibility and would reflect Ireland’s long-standing sense of solidarity with low- income countries (and would probably also generate some positive press for Ireland).

With regard to climate justice within Ireland, we share An Taisce’s belief* that funding of ‘green’ infrastructure and other existing state-funded climate action should continue to derive from the general exchequer income, rather than from carbon fee revenue.

With this in mind, and taking into account Ireland’s responsibility to contribute to international climate finance, it seems advisable that an additional levy on ‘luxury’ uses of carbon (e.g. on first class flight tickets and high-emissions luxury vehicle sales and rentals) be introduced to complement the ‘core’ carbon fee, so as to generate additional revenue for properly addressing fuel poverty within Ireland and, in more general terms, provide extra support for those who will be most adversely affected by rising fuel prices.

Submitted by the Feasta Climate Group, January 17 2019.

More information on the Feasta climate group’s work on carbon cheques can be found at http:// www.capandshare.org, http://www.capglobalcarbon.org and http://www.sharingforsurvival.org.

*We are referring here to a submission made by An Taisce’s Climate Committee to the Joint Oireachtas Committee on January 16.

Endnotes

. (i)  A discussion of the differing repercussions of supply-and demand-side approaches to climate policy can be found here: https://www.vox.com/energy-and-environment/2018/4/3/17187606/fossil-fuel-supply
. (ii)  See for example https://www.nytimes.com/2016/03/02/business/does-a-carbon-tax-work-ask-british- columbia.html
. (iii)  Outline of a possible partnership between Ireland and a Global South country to eliminate fossil fuel consumption and promote climate justice: http://www.capglobalcarbon.org/2017/08/11/submission-to-the- citizens-assembly/

Featured image source: https://fr.freeimages.com/photo/storm-1186462

Note: Feasta is a forum for exchanging ideas. By posting on its site Feasta agrees that the ideas expressed by authors are worthy of consideration. However, there is no one ‘Feasta line’. The views of the article do not necessarily represent the views of all Feasta members. 

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