1887

OECD Environment Working Papers

This series is designed to make available to a wider readership selected studies on environmental issues prepared for use within the OECD. Authorship is usually collective, but principal authors are named. The papers are generally available only in their original language English or French with a summary in the other if available.

English

Ireland's Carbon Tax and the Fiscal Crisis

Issues in Fiscal Adjustment, Environmental Effectiveness, Competitiveness, Leakage and Equity Implications

Beginning in late 2008, Ireland experienced a fiscal crisis. This resulted in November 2010 in agreement between the Irish government and the European Central Bank, the European Commission and the International Monetary Fund (IMF) – known collectively as ‘the Troika’ – whereby the latter provided substantial financial support, on condition that a number of revenue raising and expenditure reduction targets were met. Also in 2010, a carbon tax at a rate of EUR 15 per tonne of CO2 was introduced, covering most CO2 emissions from the non-traded sectors (mainly transport, heat in buildings and heat and process emissions by small enterprises). This paper describes the features of the tax, recounts the story of its interplay between fiscal adjustment and helping meet the obligations to raise taxes, and implications for competitiveness and carbon leakage, environmental effectiveness and equity issues, and draws some conclusions regarding why it happened, and provides some tentative insights for other countries in a similar situation.

The circumstances that resulted in a carbon tax being proposed and subsequently introduced in Ireland include: Leadership by the Green Party; limited public opposition; Government need for the income; supports the Green Economy; support from the academic and wider policy population; exemptions for large emitters (many in EU ETS) and agriculture; effective engagement and good planning...

English

Keywords: carbon tax, policy lessons, fiscal adjustment
JEL: Q38: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Nonrenewable Resources and Conservation / Nonrenewable Resources and Conservation: Government Policy; P48: Economic Systems / Other Economic Systems / Other Economic Systems: Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies; Q58: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Environmental Economics: Government Policy; Q48: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Energy / Energy: Government Policy
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