A carbon tax that cuts greenhouse gas emissions AND the budget deficit

I know it is physically a long way from the Lockyer Valley to Ireland.  The link is that both are subject to carbon taxes – and the difference is that the Irish carbon tax is cutting greenhouse gas emissions and making a significant contribution to reducing government debt.  And it’s not just carbon taxes: a range of environmental impacts whose cost is usually externalised by those responsible for creating them (meaning that we all pay for those impacts, whether we had a part in causing them or not), are now being charged to the source, whether it is a business or private individuals.

The following is taken from an article by Elisabeth Rosenthal in the New York Times  of December 27.

Over the last three years, with its economy in tatters, Ireland embraced a novel strategy to help reduce its staggering deficit: charging households and businesses for the environmental damage they cause.

The government imposed taxes on most of the fossil fuels used by homes, offices, vehicles and farms, based on each fuel’s carbon dioxide emissions, a move that immediately drove up prices for oil, natural gas and kerosene. Household trash is weighed at the curb, and residents are billed for anything that is not being recycled.

Derek Speirs for The New York Times

The Irish now pay purchase taxes on new cars and yearly registration fees that rise steeply in proportion to the vehicle’s emissions.

Environmentally and economically, the new taxes have delivered results. Long one of Europe’s highest per-capita producers of greenhouse gases, with levels nearing those of the United States, Ireland has seen its emissions drop more than 15 percent since 2008.

Although much of that decline can be attributed to a recession, changes in behavior also played a major role, experts say, noting that the country’s emissions dropped 6.7 percent in 2011 even as the economy grew slightly.

“We are not saints like those Scandinavians — we were lapping up fossil fuels, buying bigger cars and homes, very American,” said Eamon Ryan, who was Ireland’s energy minister from 2007 to 2011. “We just set up a price signal that raised significant revenue and changed behavior. Now, we’re smashing through the environmental targets we set for ourselves.”

… when the Irish were faced with new environmental taxes, they quickly shifted to greener fuels and cars and began recycling with fervor. Automakers like Mercedes found ways to make powerful cars with an emissions rating as low as tinier Nissans. With less trash, landfills closed. And as fossil fuels became more costly, renewable energy sources became more competitive, allowing Ireland’s wind power industry to thrive.

Even more significantly, revenue from environmental taxes has played a crucial role in helping Ireland reduce a daunting deficit by several billion euros each year.

The three-year-old carbon tax has raised nearly one billion euros ($1.3 billion) over all, including 400 million euros in 2012. That provided the Irish government with 25 percent of the 1.6 billion euros in new tax revenue it needed to narrow its budget gap this year and avert a rise in income tax rates.

Although first proposed by the Green Party, the environmental taxes enjoy the support of all major political parties “because it puts a lot of money on the table,” said Frank Convery, an economist at University College Dublin. The bailout plan for 2013 requires Ireland to embrace a mix of new tax revenues and spending cuts.

Not everyone is happy. The prices of basic commodities like gasoline and heating oil have risen 5 to 10 percent. This is particularly hard on the poor, although the government has provided subsidies for low-income families to better insulate homes, for example. And industries complain that the higher prices have made it harder for them to compete outside Ireland.

“Prices just keep going up, and a lot of people think it’s a scam,” said Imelda Lyons, 45, as she filled her car at a gas station here. “You call it a carbon tax, but what good is being done with it to help the environment?”

The carbon tax is levied on fossil fuels when they enter the country and is then passed on to consumers at the point of purchase. The automobile sales tax, which ranges from 14 to 36 percent of a car’s market price depending on its emissions, is simply folded into the sticker price.

That sent manufacturers racing to reduce emissions. Automakers like Mercedes and Volvo began making cars with high-efficiency diesel engines that shut off rather than idle when they stop, for example. “For manufacturers it’s all, ‘How low you can get?’ ” said Donal Duggan, a brand manager at an MSL showroom near central Dublin.

Other emissions taxes on cars, including the annual car registration fee, or road tax, are billed directly to customers, potentially adding thousands to annual operating costs. Ninety percent of new car sales last year were in the two lowest-emission tiers.

The taxes on garbage had an immediate impact. In Dun Laoghaire Rathdown County in southeastern Dublin, each home’s “black bin” for garbage headed to the landfill is weighed at pickup to calculate quarterly charges. Green bins for recyclables are emptied free of charge.

“There was a big furor initially, but now everything I throw out, I think, ‘How could I recycle this?’ ” said Tara Brown, a mother of three.

How much of a crisis does Australia have to experience before we have a government that has the guts to introduce a real and effective carbon tax?

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