Price of petrol, diesel and coal to face hikes under carbon tax plans

IRELAND needs to hike carbon taxes on fossil fuels by at least 50pc to drive a move towards cleaner forms of energy and help tackle climate change.

The OECD says carbon taxes are not reducing energy consumption, improving energy efficiency or helping to tackle climate change – because they are too low across most countries.

A report on energy taxes says that countries including Ireland impose taxes on road transport – but not enough on coal and electricity generation, and that the levies imposed do not compensate for the environmental damage caused.

It also points to lower tax rates for diesel compared with petrol, despite diesel being more polluting and having a greater impact on air quality.

Data from the Department of Finance shows that environmental taxes amounted to €3.35bn in 2016. Carbon taxes are currently levied at €20 per tonne of emissions, but the OECD says the “minimum” figure should be €30.

If the Government hiked the tax to €30 per tonne, this would still not be high enough to encourage behavioural change, according to the OECD. But it would result in price hikes across petrol, diesel, home-heating fuels and coal, ranging from 2pc for a litre of petrol to 6.6pc on a 40kg bag of coal.

The rate of excise on a litre of petrol here is 58.7c, including a 4.6c carbon charge. This is the 11th highest rate in the EU. For diesel, it’s 47.9c, including the 5.3c carbon tax, and we are ranked seventh.

The OECD study of 42 countries which account for 80pc of global energy use, says almost all climate taxes are “too low” and are falling “well short” of their potential to improve the climate and environment. Between 2012 and 2015, there has been little progress on implementing the “polluter pays” principle.

“Comparing taxes between 2012 and 2015 yields a disconcerting result,” said OECD secretary-general Angel Gurría (inset). “Efforts have been made, or are underway, in several jurisdictions to apply the polluter-pays principle but, on the whole, progress towards the more effective use of taxes to cut harmful emissions is slow and piecemeal. Governments should do more and better.”

The ‘Taxing Energy Use 2018’ report says that governments had “joined forces” to fight climate change under the Paris climate deal, with deep cuts required to reduce emissions and prevent average global temperature rises above 2C.

“A bird’s eye view of effective taxes per ton of CO2 across all countries reveals that there is hardly any change in the tax rates on emissions outside the road transport sector,” it says, “Taxes continue to be poorly aligned with environmental and climate costs of energy use, across all countries.” It says that countries including Ireland impose “relatively high” taxes on oil, but practically none on coal, which is considered to have a more profound impact on emissions and air quality.

In 2015, outside of road transport where “meaningful” tax-rate increases have been imposed, 81pc of emissions were untaxed. Tax rates were below the low-end estimate of climate costs at €30 for 97pc of emissions.