A carbon tax is a tax levied on the carbon content of goods and services, predominantly in the transport and energy sectors. Carbon taxes are intended to reduce carbon dioxide (CO 2) emissions by increasing prices, thereby decreasing demand for such goods and services. Its effectiveness in achieving this objective is debatable as it is based on a superposition that consumers have a practical alternative to the taxed product, and this is not always the case.
In 2010 a carbon tax was introduced in Ireland. The carbon tax applies to kerosene, marked gas oil, liquid petroleum gas, fuel oil, natural gas and solid fuels such as coal and peat briquettes.
The rate of carbon tax from 1 May 2013 to 1 May 2014 was based on a charge of €10 per tonne of CO2 emitted by the fuel concerned. The rate increased to €20 per tonne with effect from 1 May 2014.
It was announced in Budget 2021 that the carbon tax on fuel would increase by €7.50 from €26 per tonne to €33.50 per tonne. The increase applied to auto fuels from midnight on 13 October 2020 and to non-auto fuels like home heating and solid fuels from May 1st, 2021.
The Finance Bill legislated for a carbon tax hike of €7.50 every year until 2029 and €6.50 in 2030, to achieve €100 per tonne.
This will have very serious cost implications by the time the tax reaches €100 per tonne in a few years, and there is little you can do about it except find ways to reduce consumption.
What will it mean when it is €100 per tonne?
By that stage the carbon tax alone on a 60-litre refill of petrol will be €17.20, or €19.65 for diesel. As for home heating oil, it will add €259.10 to a 900-litre refill, €2.60 to that bale of peat briquettes if they still exist, €12 to the bag of coal and €230 to your annual gas bill.
Every euro on the official rate of carbon tax adds 0.28 cent per litre of petrol or 0.33 cent per litre of diesel.
What you can do is order in any fuel, (gas, home-heating oil, coal and briquettes), you can before may 1st, to avoid the increase on your next top up. The saving is not huge but for many every little bit helps.
Every euro rise in carbon tax per tonne announced by the Government translates into €2.51 per 900-litre refill of kerosene (home heating oil). So the €7.50 per ton increase in carbon tax will lead to an increase of €19 for a 900 litre fill from May 1st.
For those still burning solid fuels, a 12.5kg bale of peat briquettes will go up by 20 cent, a 40kg bag of coal by 90 cent.