Sir, – The carbon tax has two objectives. One is to discourage the use of fossil fuels by increasing the prices of the various fossil fuels. This is the “price effect” on consumption. The second is to provide guaranteed funding for a variety of spending initiatives associated with “greening” the economy. This is the “ring-fencing” effect.
The Ukraine war and responses to it, following the cost consequences of the pandemic, have already caused fossil fuel prices to rise by a multiple of the proposed carbon tax increase. This suggests that the price effect of the proposed increase has been achieved several times over. The implication is that there is no need for the carbon tax hike to deliver the desired discouraging of consumption in present circumstances, and at present fuel prices.
If the Green Party still wishes to increase the carbon tax for ideological reasons, and in order to secure the ring-fencing effect, it is quite open to the Government to reduce the fuel excise duties by an amount that offsets the carbon tax hike, as existing excise duties are already well in excess of minimum EU excise rates.
If the Government persists with a programme for tax-based increases in fuel prices when market forces have already resulted in price increases that are beyond the wildest dreams of environmentalists (and similarly scaled nightmares for hapless consumers), and are adding to supply-side inflation pressures, it can hardly be surprised if a populist opposition makes hay while the sun shines. – Yours, etc,
MOORE McDOWELL,
Delgany,
Co Wicklow.