CARBON TAX WAS the subject of electoral-related criticism this week, when Sinn Féin leader Mary Lou McDonald said that the measure has not resulted in a reduction in emissions.
The tax, which is levied on the carbon content of fuels such as gas, oil and solid fuels, was targeted by opposition parties during the last Dáil term after the Government committed to increasing it by €7.50-per-tonne every year until 2030.
Sinn Féin has long pledged to abolish the tax if it gets into Government, and McDonald criticised the measure again this week when she said it had not reduced carbon emissions. But is she right?
Sinn Féin leader Mary Lou McDonald said that the carbon tax has not led to a reduction in emissions.
Speaking during a meeting of the National Council of the Irish Farmers’ Association (IFA) on Tuesday, McDonald said that the measure was a “lazy” and “the easy thing to do”.
“It has not reduced our emissions and is extremely unfair,” she said.
Firstly, it’s crucial to do a quick overview of the history of carbon tax in Ireland in the context of reaching emissions targets.
The aim of a tax on carbon emission is to discourage people from consuming carbon-emitting fuel and encourage them to waste less energy or move to more green-friendly fuels.
Taxing carbon is a method of reducing fossil fuel consumption that has appealed to governments because of its simplicity.
It is seen as a market-based approach to mitigating climate change, rather than a regulatory one; that is to say, it puts a price on carbon rather than saying (hypothetically) that people could only use a certain amount of carbon in a year.
In Ireland, revenue from carbon tax is also ring-fenced by the Government and re-allocated for spending on climate action measures, such as retrofitting, agriculture schemes, and social protection for communities affected by climate action and the transition to a green economy (however, not all of the “ringfenced” funds have been spent on climate action schemes).
Ireland first introduced carbon tax in 2010 as part of efforts by the Fianna Fáil-led Government to lower carbon emissions; the rate of carbon tax was set at €15 per tonne in the first year, and it gradually rose to €26 per tonne by 2020.
The Finance Act 2020, which legislated for measures in the first Budget set by the Government (which included the Green Party), stated in law that carbon tax should increase by €7.50 every year up until 2029 and by €6.50 in 2030.
This means that the rate of carbon tax will have reached €100 per tonne of CO2 emitted by 2030.
The introduction of these increases and the existence of the tax itself are not without controversy.
Sinn Féin and others have previously claimed the tax is unfair, and that it will widen inequality because the measure has a disproportionate impact on poorer people.
This is not just a political claim: a report by the Economic and Social Research Institute from 2019 said that carbon tax increases could be regressive and could impact negatively on rural households in particular (though it also said this could be reduced by through so-called ‘revenue recycling’ or increases in welfare payments).
But what about the suggestion that carbon tax has had no impact on Ireland’s emissions?
On the one hand, there does not appear to be much correlation between the introduction of a carbon tax and carbon emissions in Ireland.
According to the Environmental Protection Agency (EPA), Ireland’s greenhouse gas emissions increased between 1990 and 2001, when they peaked at 70.82 million tonnes of CO2 equivalent (the measure of how much a country or industry emits in a single year).
However, emissions gradually reduced from 2002 – eight years before a carbon tax was introduced in Ireland – until 2014.
To make things even more confusing, emissions then increased again in 2015 and 2016, remained relatively stable in 2017 and 2018, and then saw a 3% decrease in 2019.
In 2020, when the Government introduced multiple rounds of Covid restrictions, emissions fell again by 3.6% compared to 2019.
This is where things get a little less straightforward, because 2021 was the first year in which the annual €7.50 increase was brought in as an attempt to disincentivise people from using fossil fuels.
In 2021, Ireland’s overall emissions increased by 4.5%, which the EPA attributed to the lifting of Covid restrictions, more widespread use of coal and less use of renewables.
In particular, the EPA highlighted a 17.6% increase in emissions from the energy sector was driven by a tripling of coal and oil use in electricity generation.
However, it also said that residential emissions decreased by 4.9% because of a combination of less time in the home (part of the post-pandemic return to normality), a milder winter and higher fuel prices – which occurred in part because of the carbon tax.
The following year, emissions fell by 1.9% compared with 2021, with the EPA again highlighting higher fuel prices, greater use of renewable energy and behavioural change.
It specifically said that residential emissions decreased significantly in 2022, with “a large rise in fossil fuel prices” one of the main drivers behind that trend.
In 2023, the last year for which figures are available, emissions fell again by 6.8% and reached their lowest point in three decades, including the lowest level of residential emissions since 1990.
In a report on emissions last year, EPA Director General Laura Burke specifically said the drop showed the impact of “climate action and decarbonisation measures” such as an increase in the use of renewables and less use of fossil fuels.
The agency also said that high fuel prices and a milder winter were “significant contributors” to the reduction in fossil fuel use in the residential sector.
Together, all of these figures and reports tell us a number of things.
Firstly, the existence of carbon tax on its own doesn’t appear to correlate to any impact on Ireland’s emissions (which can be seen from the trajectory of emissions in both directions after the tax was introduced in 2010).
However, the introduction of a legislative measure in 2020 that has resulted in a yearly hike in carbon tax – and by extension, the price of fossil fuels – has coincided with a dramatic drop in Ireland’s carbon emissions and the use of fossil fuels.
The EPA has explicitly linked that decrease in emissions with a rise in fuel prices – which have increased in part because of the carbon tax – and climate action measures that have led to fewer people using fossil fuels, which the carbon tax was intended to do.
In other words, gradual increases in the carbon tax do appear to have been a factor in Ireland’s emissions falling to their lowest level in decades.
However, there are is another important factor to consider.
Although the cost of fossil fuels has increased because of the carbon tax, the measure is not the only reason behind the increase.
Geopolitical factors have also had an impact, with conflicts in the Middle East (where a lot of the world’s oil comes from) and sanctions on Russia as a result of the war in Ukraine also driving up fuel prices since 2022.
In that sense, it’s hard to gauge the precise impact that the hike in carbon tax has had on people’s use of fossil fuels because significant increases in the price of fuel didn’t only occur because of the tax.
On top of that, the EPA also mentioned that milder winters were a factor in people using less fossil fuels; if those winters were more severe, it’s impossible to know whether people would still have used less fossil fuels because of carbon tax.
Ultimately, the logical problem in assessing McDonald’s claim is that it is difficult to say exactly how much carbon tax contributes to an increase in fuel prices, and how much that in turn leads to lower emissions.
As the EPA reports show, reduced emissions are caused by a number of factors, including reductions across different parts of society – like reduced fertiliser nitrogen use in the agricultural sector or the installation of heat pumps in people’s houses.
Emeritus Professor of Geography at Maynooth University John Sweeney told The Journal that the confluence of so many factors means that it is not possible to quantify the impact of carbon tax.
However, he also said that someone cannot claim the carbon tax had no effect on emissions when data shows that fossil fuel-related emissions fell.
“Carbon tax is designed to nudge a change in behaviour across a range of fossil fuel consuming activities,” he said.
“It is not possible to exactly quantify its effect in reducing emissions. However, it is worth noting that emissions fell in every fossil fuel consuming sector last year.”
Similarly, UCC Professor of Sustainability Brian Ó Gallachóir told us that “it is incorrect to say that the carbon tax has not led to carbon dioxide emissions reduction in Ireland”.
He pointed to the impact of the annual €7.50 increase in the tax introduced in 2021 as a direct reason for emissions reduction, on top of the indirect impact of using the revenues generated from the tax to provide financial support for emissions reduction measures.
Furthermore, a paper by two ESRI researchers that was published in the journal Economic Modelling earlier this year also supports the claim that carbon taxes led to reduced emissions.
It said: “The results show that if the government increases the level of the carbon tax gradually to €100 [per tone of CO2 emitted] in 2030 and uses the raised revenue to finance its expenditures, a substantial decline in the economy-wide emissions will be accompanied by a slight decrease in overall economic activity as measured by real GDP.”
The paper also noted that the negative impacts of the tax on poorer households could be offset by recycling revenues from the tack back to households through lump-sum transfers.
The Journal contacted Sinn Féin for comment about whether the party or McDonald wished to clarify or add any additional context to her remarks.
A response from a party spokesperson did not directly address McDonald’s claim that the tax had not reduced emissions, but instead criticised the measure for not being effective enough and for its impact on poorer households.
It cited reports by The Climate Change Advisory Council, the EPA and the Sustainable Energy Authority of Ireland, all of which said that the country would miss its emissions targets by 2030.
In arguing that the tax disproportionately impacted poorer households, Sinn Féin said that the Government failed to “take a tougher stance on the largest emitters”.
However, the spokesperson did not directly respond to official figures which showed that Ireland’s emissions have fallen for the past two years.
Sinn Féin leader Mary Lou McDonald claimed this week that the carbon tax has not led to a reduction in emissions.
Ireland’s carbon tax was first introduced in 2010 and did not lead to a reduction in carbon emissions (which were already falling for eight years before that, and rose again in 2014).
However, the introduction of a measure in 2020 to increase the tax by €7.50 every year has coincided with a reduction in Ireland’s carbon emissions, which have fallen to their lowest level since 1990.
The Environmental Protection Agency has attributed this drop in emissions to less use of fossil fuels, an effect that the carbon tax hike intended, in part because of the increased price of fuel (though this was only one of a number of factors mentioned).
It is difficult to quantify exactly how much carbon tax has contributed to an increase in fuel prices, and in turn how much increased fuel prices have led to lower emissions.
But two experts who spoke to The Journal said that it is not valid to claim that carbon tax has had no impact on emissions whatsoever, because hikes in the tax have coincided with a significant reduction in emissions.
A paper from this year by the ESRI analysing the impact of the tax in Ireland also supports the claim that carbon taxes led to reduced emissions.
This research states that if the annual price carbon tax hikes continue as flagged, Ireland will see “a substantial decline in the economy-wide emissions” by 2030.
We therefore rate the claim that carbon tax has not led to a reduction in emissions as FALSE. As per our verdict guide, this means the claim is inaccurate.
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