Carbon tax proposals and domestic renewable energy

gizmo555

The Commission on Taxation has recommended a carbon tax which at current rates would add, for example, about 50c to the price of a bale of turf briquettes, €60 on a tonne of coal and 1.2c to a kWh of electricity.

I am strongly in favour of this type of tax regime, as it satisfies the principle that the polluter should pay and if done correctly as the report puts it to “ensure that behavioural change aspects are maximised and it is not seen as ‘just another tax’ ”, it should stimulate a reduction in energy demand and a movement away from polluting energy sources (although I wonder how they'll deal with people who cut their own turf . . . .)

I think this is a much better approach than grants (although I must admit I've just availed of the Home Energy Savings scheme grant, since it was there and I was doing insulation work on my house anyway.) I tend to agree with Gerry Robinson who said in last Friday's Irish Times, albeit in a different context, "in the end, it’s all about tax. Grants generally produce unusual, rather than helpful behaviour." There's also always a strong risk, although this is perhaps lessened in the present economic climate, that suppliers will just bump up their prices in line with grant levels.

What do other posters think about the effect the proposed carbon tax may have on reducing energy demand and takeup of renewable energy sources at the domestic level? Which do you think is better, stick or carrot, tax or grant?

BadCharlie

1.2c to a kWh of electricity would be a very bad move. We all ready pay the highest cost for electricity in the EU. And we are losing jobs each month because of this factor. Putting it up more will result in more job gone which at this time would be very bad for the country.

sydthebeat

carbon tax should be paid by usage and should be available on choice....

Therefore i dont mind the briquette, coal or oil tax.

However, our electricity is state produced and we have no control over how its produced. We have severely inefficient power station producing electricity from fossil fuels.
we also import a lot of nuclear powered electricity from europe.

Until there is such a time as we can select who our electricity supplier is, and pay carbon tax based on the fuel used by that supplier, i believe an electricity carbon tax is inequitable, penal and unfair.

Plus, what the hell is happening with petrol / diesel prices??
In sept 08 oil barrel prices rose to roughly $120..... petrol prices in ireland were in the range of 120 litre, diesel was about 106....
Today oil barrel prices are $68... slightly over half.... yet the average price in my town for petrol is 118 and diesel is 107......

what the hell!!!!

and now they are talking about putting another 5-8 cent on both as a 'carbon tax'..... :eek:

gizmo555

First of all, to be clear, the figure of 1.2c per unit is my own estimate, based on the Commission's recommendation of a minimum tax of €20 per tonne of CO2 and the ESB's figure of 0.642kg of CO2 emitted per unit - actually, at that it would be more like 1.28c per unit.

That would represent an 8.8% increase. To begin with, you could more than offset this by moving to Airtricity or Bord Gais. Presumably, Airtricity's carbon tax per unit will be lower, although of course I accept they haven't the capacity to supply everyone in the country. Also, the point of the tax isn't to raise money, but to change behaviour and reduce pollution. I think if we're honest with ourselves, there are few of us who couldn't with a bit of effort reduce our electricity use at home by 8% or 9% and probably with little or no real effect on our lifestyle or comfort.

maniac101

gizmo555 wrote: »

First of all, to be clear, the figure of 1.2c per unit is my own estimate, based on the Commission's recommendation of a minimum tax of €20 per tonne of CO2 and the ESB's figure of 0.642kg of CO2 emitted per unit - actually, at that it would be more like 1.28c per unit.

Electricity prices won't change as a result of carbon tax. Electricity generators are already required to participate the EU Emissions Trading System. Any costs associated with buying any additional carbon credits will already be incorporated into the generators running costs. So fossil fuels used to generate electricity will be exempt from carbon tax.

sydthebeat wrote: »

we also import a lot of nuclear powered electricity from europe.

No we don't. We import a small amount of electricity from Northern Ireland (equivalent to less than 2% of the total energy demand required to provide electricity in the republic). Of that small amount, only a small proportion of it could be attributed to nuclear, given the generation mix in NI and Britain. Anyway, what has this to do with carbon tax?

Until there is such a time as we can select who our electricity supplier is, and pay carbon tax based on the fuel used by that supplier, i believe an electricity carbon tax is inequitable, penal and unfair.

You already can select who your supplier is. As mentioned above, the proposed carbon tax isn't relevant to electricity prices.

gizmo555

maniac101 wrote: »

Electricity prices won't change as a result of carbon tax. Electricity generators are already required to participate the EU Emissions Trading System. Any costs associated with buying any additional carbon credits will already be incorporated into the generators running costs. So fossil fuels used to generate electricity will be exempt from carbon tax.

That's interesting. One way or another though, won't the carbon tax have to be visible to the consumer if it's to achieve the stated aim of changing behaviour and reducing emissions?

For example, commercial consumers in Northern Ireland that get electricity from NIE are subject to a carbon levy from which Airtricity customers are exempt (don't know about domestic accounts).

maniac101

gizmo555 wrote: »

That's interesting. One way or another though, won't the carbon tax have to be visible to the consumer if it's to achieve the stated aim of changing behaviour and reducing emissions?

I think that would be a good idea. At the moment the price signal is only there for the electricity generators. That said, if the CO2 cost was reflected in your electricity bill today it would be pretty negligible as the generators currently get most of their CO2 allowances for free.

gizmo555 wrote: »

Which do you think is better, stick or carrot, tax or grant?

I would tend towards the stick only approach. I can't see the need to promote renewable technologies with subsidies while simultaneously penalising CO2 emissions with taxes. One regulation should do the job.

gizmo555

maniac101 wrote: »

I would tend towards the stick only approach. I can't see the need to promote renewable technologies with subsidies while simultaneously penalising CO2 emissions with taxes. One regulation should do the job.

I agree, which is why this comment fom the Commission's report on what to do with carbon tax revenues worries me:

"they could be used to address social issues – funding tax cuts or social welfare increases for lower income households and/or to subsidise further action on emissions"

http://www.taxcommission.ie/downloads/Part%209.pdf

If the carbon tax is properly done, it should on its own give the impetus needed, without the need for further subsidy.

As James Lovelock, the renowned environmentalist of "Gaia Hypothesis" fame put it:

"Subsidies almost always breed scams and this is true of most forms of renewable energy now proposed and used."

http://www.guardian.co.uk/environment/2009/mar/24/biochar-earth-c02

ferngreen

Carbon taxes although a good idea in some ways still dont solve the problem. In general most people know about the benifits of Renewable energy but cannot afford to replace them. making the renewable energies cheaper and within grasp of everyone regardless of income I would think is a better idea.

Make the renewables cheap AND the fossil fuels expensive so you would be mad not to go with renewables is the best way. grants simply don't do enough.

If a fossil fuel heating product is €3,000 and a renewable equilivant is €7,500 the grant should be €4,500 so there is no-one in the right mind who could go with the fossil fuel option

gizmo555

ferngreen wrote: »

Carbon taxes although a good idea in some ways still dont solve the problem. In general most people know about the benifits of Renewable energy but cannot afford to replace them. making the renewable energies cheaper and within grasp of everyone regardless of income I would think is a better idea.

Make the renewables cheap AND the fossil fuels expensive so you would be mad not to go with renewables is the best way. grants simply don't do enough.

If a fossil fuel heating product is €3,000 and a renewable equilivant is €7,500 the grant should be €4,500 so there is no-one in the right mind who could go with the fossil fuel option

The tax is supposed to reflect the environmental cost of carbon emissions, so that those who either won't or can't reduce their carbon footprint, either through reduced energy use or switching to renewables, have to pay for the pollution they cause.

The commission has proposed a floor on the tax equivalent to €20 a tonne and the current market price per tonne is more like €15. A domestic renewables based boiler would therefore have to save emissions of between 225 and 300 tonnes of carbon for the taxpayer just to break even on the cost of a €4,500 grant. This level of saved emissions would take decades and would be far beyond the likely lifespan of the renewables fueled boiler.

Grants just distort the market and unnecessarily steer people towards the grant aided technologies away from possibly equally useful technologies. They also do nothing to help form the habits of reducing energy use which are equally far more important. The lunacy of this can be seen in the fact that a passive house, which essentially needs no heating at all, couldn't meet the new building requirements because it wouldn't have the minimum requirement of renewably sourced heating.

ferngreen

gizmo555 wrote: »

The tax is supposed to reflect the environmental cost of carbon emissions, so that those who either won't or can't reduce their carbon footprint, either through reduced energy use or switching to renewables, have to pay for the pollution they cause.

The commission has proposed a floor on the tax equivalent to €20 a tonne and the current market price per tonne is more like €15. A domestic renewables based boiler would therefore have to save emissions of between 225 and 300 tonnes of carbon for the taxpayer just to break even on the cost of a €4,500 grant. This level of saved emissions would take decades and would be far beyond the likely lifespan of the renewables fueled boiler.

Grants just distort the market and unnecessarily steer people towards the grant aided technologies away from possibly equally useful technologies. They also do nothing to help form the habits of reducing energy use which are equally far more important. The lunacy of this can be seen in the fact that a passive house, which essentially needs no heating at all, couldn't meet the new building requirements because it wouldn't have the minimum requirement of renewably sourced heating.

For the tax payer to break even? when did that ever happen in this country?
Its about investment in the environment.

Anyway the taxpayer will save money as we will be hit with huge fines under the kyoto protocall so we can either spend the money on renewables or spend it in fines

gizmo555

ferngreen wrote: »

For the tax payer to break even? when did that ever happen in this country?
Its about investment in the environment.

Indeed. But surely the investment has to bear some relationship to the likely return in terms of harm prevented to the environment?

Let's take as an example the estimate in another recent thread here that a well designed, reasonably priced solar hot water system could generate about 1,800 kWh of energy annually - round it up to 2,000kWh to err on the generous side. On the figures provided, that system would attract a grant of €1,100. Even if all of the energy displaced was electricity, which is unlikely, this would remove a little more than 1 tonne of CO2 annually, based on the average emissions Irish electricity generators currently produce. At €20/tonne it would take over 50 years just to recover the cost of the grant, before there is any nett gain. At that, we have to assume the system is operated at full capacity for that long, with no reduction in efficiency, and take no account of the embodied CO2 in the system itself. No system on the market will last that long. The grant is out of any sensible proportion to the reduction in CO2 emissions.

ferngreen wrote: »

Anyway the taxpayer will save money as we will be hit with huge fines under the kyoto protocall so we can either spend the money on renewables or spend it in fines

My opinion is we should get rid of all the grants, impose a meaningful level of carbon tax and let the market work out what is the best way to reduce emissions.