Do we need a carbon tax? Yes- countries like Denmark show such a tax is compatible with strong growth, argues Pat Finnegan of GRIAN
As public consultations on the carbon tax begin, and ugly reminders develop of the last debate on this issue in the early 1990s - when the fossil fuel lobby won out handsomely - we would be wise to consider the issue from the perspective of ethics and the public good, as opposed to private interest and personal profit.
Firstly, we should remember what the tax is supposed to be about - reducing the consumption of fossil fuels. The tax should have been introduced in 2002, according to commitments given by the Government in the National Climate Change Strategy. The current consultation is proposing that the tax be put back to Budget 2005.
The delay is on the one hand incomprehensible - in the light of both the threat from climate change and the threat of penalties for unchecked emissions in the Kyoto Protocol - and on the other hand absolutely indicative of the lack of senior stewardship within the Government of the public's long-term economic interest.
With the notable exception of the Department of Environment and Local Government (DELG), almost every other senior ministry has been fighting off this tax since 2001, as close perusal of the documents circulated for this consultation will reveal.
The nay-saying Departments appear to be utterly persuaded by the big business case that the tax will prejudice that famous (and increasingly ragged) tiger economy fetish, "competitiveness".
Nothing could be further from the truth. In fact, as GRIAN, an Irish NGO campaigning for action on climate change, has argued with Government for over five years, prudent public policy would indicate the opposite.
Since the European Commission's far-sighted initiative to introduce a pan-European carbon tax was shot down in 1992, a number of the more conscientious member-states have decided to take fiscal action against fossil fuels on their own initiative.
Buried deep within the consultation papers on the Department of Finance's website you can see the results (TSG/02/23a, Annex 7).
Seven members of the 15 EU countries already have a carbon tax, many for several years, including three of the largest states, France, Germany and the UK.
None of these is currently losing competitiveness any faster than Ireland.
Six of the seven fill second to seventh places in the European Environment Agency's ranking of progress by member-states towards compliance with the Kyoto Protocol. Luxembourg is in first place, largely because its small size has enabled it to reduce its emissions by switching to imported electricity.
Ireland was in 14th place in 1999 and is now almost certainly the furthest off target - in last place.
The experience of the Nordic countries is particularly revealing. All of them have the tax; all of them for over 10 years. Several of them have been rising in international comparisons of industrial competitiveness in recent years, at about the same rate that Ireland has been falling.
In a number of evaluations, their environmental performance is explicitly a reason for their progress.
Denmark offers a good cross-comparison with Ireland. It has had the tax since the 1970s. Since then energy efficiency in Denmark has increased by 50 per cent. The savings on energy imports have been substantial, and the economy has benefited as a result. Emissions have been reduced by nearly 10 per cent, even though the economy has grown strongly over that period.
But what is more significant is the Danish approach to the opportunities provided by taking climate change seriously. The tax stimulated a process whereby previously unquestioned business orthodoxy was shown to be not only the antithesis of what it had always claimed - efficient - but also inspired a new set of questions about the shape of the future.
That future now includes both the moral responsibility of not causing further climate change, and severe penalties for those economies which get their sums wrong on the Kyoto Protocol.
On the first issue, Irish per-capita emissions of carbon dioxide are by far the highest in the EU, and the fifth-highest in the world. At over 18 tonnes of CO22 per head, according to updated figures calculated by GRIAN, Irish emissions are approaching double the EU average of 10.8. Even worse, our emissions are still growing, and furthermore at the fastest rate in the EU.
On this trend, we will soon be approaching per-capita levels in the US of 25.4 tonnes.
Irish business, in its opposition to the carbon tax, is clearly demonstrating that it feels far happier being closer to Boston - more exactly, to Dallas - than it is to Berlin.
On the second issue, projections prepared by GRIAN for the World Summit on Sustainable Development last year are now regularly quoted by DELG. They show a low estimate for the cost to the economy of a Kyoto overshoot in terms of compensatory bought-in emissions permits (from other countries which have some to spare) of €275 million per year starting in 2008, and a high estimate of over €320 million per year. After 2012, the price may be expected to escalate rapidly as targets are tightened.
GRIAN has calculated that the revenue produced by the tax, if properly reinvested, could supply 1.3 million homes with carbon-free electricity, produce 7,000 construction jobs and 1,200 longer-term jobs and reduce Irish emissions by around five million tonnes of CO2 per year within four years. This is additional to the reductions estimated for the consultation by DELG.
Such a reduction could be worth up to €125 million per year within the Kyoto Protocol directly, and is capable of levering a further five million tonnes for Irish businesses which prefer to buy their reductions rather than actually create them.
Under the rules of the Protocol, without domestic reductions being made in the first place, access to emissions trading is debarred
This is why the opposition to the tax by both business and Government Departments in charge of both energy and enterprise is so baffling to GRIAN. Without the tax, business has no access to the very thing it is most demanding: "low cost" emissions-trading.
Failure to understand this creates a liability that could lock the Irish economy into competitive disadvantage for decades to come as other countries steal a march on us.
Pat Finnegan is co-ordinator of GRIAN, an Irish NGO campaigning for action on climate change and sustainable development. An expanded version of this article can be found at www.grian.ie