If the Government had held its nerve and behaved responsibly, a carbon tax would now be in place. And this State would be able to say it was making a serious effort to meet its obligations in relation to energy efficiency, global warming and the Kyoto Protocol.
Instead, short-term political expediency appears to have carried the day as the government parties bowed to pressure from interest groups and prepared for the coming general election. The potential cost to the taxpayer, from 2008 onwards, could be very great.
Already, the Department of the Environment has confirmed that it will spend €185 million in purchasing carbon dioxide credits, between 2008 and 2012, in order to compensate for a failure to reduce our levels of greenhouse gas emissions. Ireland is committed to reducing carbon dioxide emissions to 60 million tonnes by 2008, from an estimated current output of 67 million tonnes. The sum allocated by the Department for this purpose would appear to be seriously inadequate as, two years ago, the then minister for the environment, Mr Cullen, estimated the cost at €260 million a year. And he warned that failure to meet the targets set in the Government's National Climate Change Strategy would bring a reduction in emission rights and further penalties from the European Union. The closure of a number of traditional, high-energy use companies has improved the situation in the meantime, but much remains to be done.
A system of emissions trading, involving more than 100 of our major companies, took effect from January 1st as part of a wider European Union initiative. But the allocation of earlier carbon dioxide quotas to these companies was so generous that it drew criticism from the European Commission. As a consequence of that generosity, the cost of a new carbon tax would have fallen disproportionately on small businesses, transport, farming and ordinary households. The Economic and Social Research Institute recommended that the social welfare and taxation systems should be used to moderate the impact of a carbon tax on low-income families.
Rather than address these difficult issues, the Government decided to abandon its plans for a carbon tax. The former finance minister, Mr McCreevy, explained that the submissions received by his Department had been either wholly or partially opposed to it. And he said that the tax would have generated an enormous amount of bureaucracy to very little effect. Senior executives who had been given responsibility for implementing the Government's National Climate Change Strategy disagreed.
The "polluter pays" principle is a good one. It allocates responsibility for environmental damage in a transparent fashion. In this instance, a carbon tax should not have been abandoned in favour of a hidden income-tax levy on all workers. That does not send a positive signal to the public about the environment. It does not encourage a more efficient use of energy. The Government should think again.