Changes to the Carbon Tax due to take effect on 01 May 2014

Impact on households:

  • The application of the carbon tax to solid fuels i.e. coal and commercial peat (mainly peat briquettes and some turf) will mean, from 1 May 2014, an increase in price of €1.20 in the case of coal (40kg bag) and 26 cents in the case of a bale of briquettes, based on current prices.

Government assistance available to households:

  • The fuel allowance, a payment under the National Fuel Scheme to assist with home heating and payable to people on long-term social welfare payments will continue to be paid at a rate of €20 per household per week over a 26 week period in 2014 – this means it applies for half of the year which is a significant period.  The budget for the fuel allowance for 2014 is estimated at €208 million.
  • Extensive grants are available free of charge to households in energy poverty to cover the cost of retrofitting their homes under the Better Energy Warmer Homes Scheme. Since the launch of this scheme more than 105,000 households have received free energy efficiency upgrades.
  • In total, around one sixth of all homes in Ireland have received some form of Government supported energy efficiency upgrade to date. More than €57 million euro has been allocated to fund efficiency grant programmes in 2014. This will lead to another 12,000 low-income homes receiving a free energy efficiency upgrade this year.  
  • In addition to making homes more comfortable, healthier and more cost effective to run, the Better Energy Programme has supported an average of 3,500 jobs in the construction sector over the past three years.
  • Also the Minister for Housing and Planning, Jan O’Sullivan announced on 18th February an investment of €30 million to improve energy efficiency in Local Authority homes in 2014.

 Changes to the Carbon Tax due to take effect on 01 May 2014

·        It is important to note that the carbon tax increase coming into effect on Thursday 1st May is on solid fuels only and serves simply to bring the carbon tax on those fuels into line with that already applying to all other fossil fuels.

·        Carbon Tax was a measure introduced by the previous government in Budget 2010 but its application to solid fuels was subject to a Ministerial commencement order.

·        This approach was primarily adopted to delay the application of the carbon tax to solid fuel in the residential sector to allow for the development of a robust mechanism to counter the large scale sourcing of coal from Northern Ireland where lower sulphur standards apply. Such a mechanism is in place since June 2011.

·        The application of the carbon tax to solid fuels was further postponed in 2012 given the overall tax increases in Budget 2012 including in the standard rate of VAT.

·        The introduction of Carbon Tax was designed as a price signal that there is a cost associated with the consumption of fossil fuels to the detriment of the environment. It should also be noted that solid fuels have the highest carbon content of all fossil fuels. As a result they are considered the dirtiest fuels and given the environmental impact it is important that they are taxed.

·        The government chose not to introduce the carbon tax on solid fuels until after the 2012/2013 winter period. The tax was introduced in two phases

o        €10 per tonne of CO2 from 1st May 2013

o        and a further €10 per tonne of CO2 from 1st May 2014 thus bringing the carbon tax on solid fuels in line with that on all other fossil fuels i.e. at €20 per tonne of CO2.

·        Government policy on energy affordability is founded on the fundamental principle that everyone should be able to afford to adequately light and heat their home. Achieving this requires an integrated approach, an approach that involves extensive cooperation across all of Government, industry and the voluntary sector.

 How this will impact on Households


What impact will the carbon tax have on households, especially low-income households, and are there are any compensatory measures being introduced?
·        
The application of the carbon tax to solid fuels i.e. coal and commercial peat (mainly peat briquettes and some turf) will mean, from 1 May 2014, an increase in price of €1.20 in the case of coal (40kg bag) and 26 cents in the case of a bale of briquettes, based on current prices.
·        
This represents approximately an 8.2% and 6.7% percentage increase in the price of coal and peat briquettes based on averages prices of €14.60 per bag of coal and €3.90 per bale of briquette respectively.  
·        
This relatively high percentage increase is due in part to those products having no excise applied to them prior to the carbon tax. It should also be noted that solid fuels have the highest carbon content of all fossil fuels. As a result they are considered the dirtiest fuels and therefore attract a higher carbon tax.

·        The government is aware that a carbon tax on solid fuels will have an impact on households.  That is why we chose to wait until after the winter 2012/2013 period to introduce the tax and have also decided to introduce it on a phased basis i.e. €10 per tonne of CO2 emitted from 1st May 2013 and €10 per tonne of CO2 emitted from 1st May 2014 thus spreading the full rate over a 2 year period.

·        
The fuel allowance, a payment under the National Fuel Scheme to assist with home heating and payable to people on long-term social welfare payments will continue to be paid at a rate of €20 per household per week over a 26 week period in 2014 – at half the year this is a significant period.  The budget for the fuel allowance for 2014 is estimated at €208 million.

Additional Notes

·        Our dependence upon imported fossil fuels limits our ability to control energy costs except through the promotion and development of real and active competition in the energy market. Customers now have a range of choices and can shop around to seek a deal that best suits their needs and circumstances.

·        The Government will continue to support incomes by ensuring that those on low incomes are supported through the household benefits package and specifically through measures such as the electricity and gas allowance and the fuel allowance.

·        However, the most meaningful measure that we can do is to continue to improve the thermal efficiency of people’s homes and thus insulate them from the effects of rising energy costs. Extensive grants are available free of charge to households in energy poverty to cover the cost of retrofitting their homes under the Better Energy Warmer Homes Scheme. Since the launch of this scheme more than 105,000 households have received free energy efficiency upgrades.

·        In total, around one sixth of all homes in Ireland have received some form of Government supported energy efficiency upgrade to date. More than €57 million euro has been allocated to fund efficiency grant programmes in 2014. This will lead to another 12,000 low-income homes receiving a free energy efficiency upgrade this year.  

·        In addition to making homes more comfortable, healthier and more cost effective to run, the Better Energy Programme has supported an average of 3,500 jobs in the construction sector over the past three years.

·        Also the Minister for Housing and Planning, Jan O’Sullivan announced on 18th February an investment of €30 million to improve energy efficiency in Local Authority homes in 2014.