Extra Fuel Taxes All About Cash, Not Carbon

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Proposed new taxes on fuel have nothing to do with carbon or the environment and everything to do with raising more revenue, according to the AA.

“The only thing new about a Carbon Tax is the name.” Says Director of Policy Conor Faughnan. “The tax is there already. Just under 70% of the retail price of petrol is tax at the moment. We call it Excise Duty and VAT but the effect is the same.”

Petrol and diesel taxes are a highly effective way for a government to collect money but are of no use whatsoever to the environment. Fuel is extremely inelastic in response to price changes. In the last 12 months or so petrol has been at a high of €1.44 per litre (last August) to a low of 94 cent in January without significantly affecting usage. The danger here is that the Government is set to use genuine environmental concerns as a flag of convenience to cover tax increases.

“We know that it does not work as a way to change usage.” Says Faughnan. “It simply becomes an additional and unavoidable tax on movement. Worse, it is dishonest to maintain a pretence that carbon reduction is the objective. A private company would not be able to name a product this way because of advertising standards and the trade description laws. Sadly, no such rules exist to prevent the State from falsely calling this an environmental initiative.”

Making petrol and diesel more expensive will certainly cause raise extra tax money. A 5 cent per litre duty increase would take over €200m out of the pockets of ordinary motorists.

There is a widespread public perception that the car is very environmentally damaging but this is often hugely overstated. Figures from Sustainable Energy Ireland show that 13.2% of Ireland’s greenhouse gas emissions come from private cars. Most motorists believe that figure is much higher. This is a significant contribution but much smaller than other sectors. Crucially, car emissions are reducing rapidly as new cars are cleaner and greener than ever before.

“The more discussion on the environmental issues the better.” Says Faughnan. “Cars have made sensational improvements in environmental quality in recent years. That needs to be recognised and incentivised. The better informed the general public are about the issues the stronger the motorists’ case becomes.”