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Budget 2021, Carbon Tax and Just Transition

Social Justice Ireland welcomes the Budget 2021 decision to increase the carbon tax from €26 per tonne to €33.50 per tonne and that Government signalled the pathway to a carbon tax of €100 per tonne by 2030 and enshrined this into the Finance Bill. Furthermore we welcome the commitment to invest the carbon tax revenue into residential and community energy efficiency, limited social protection measures and sustainable agriculture programmes.

Collectively, these developments reflect an overdue engagement by Government with the unsustainability of our current systems, one reflected in the wide gap between today’s levels of greenhouse gas emissions and the much lower target Ireland had committed to achieve by next year.  Despite progress made in Budget 2021 there remain significant areas of concern. 

Energy poverty

Issues around renewable energy subsidies and energy poverty were not sufficiently addressed in Budget 2021.   Too often subsidies are only taken up by those who can afford to make the necessary investments. Incentives and tax structures must look at short and long term costs of different population segments and eliminating energy poverty and protecting people from energy poverty should be a key pillar of any Just Transition platform. 

While Budget 2021 did increase the fuel allowance and allocated €100m to residential and community energy efficiency, this is not enough to address the problem of energy poverty and compensation strategies could be more comprehensive.  The increased allocation to the Warmer Homes Scheme and National Retrofit Programme, while welcome, are insufficient on their own.  We regret the lack of investment in community energy advisors and community energy programmes.   It is also disappointing that Budget 2021 did not contain a commitment to review the subsidising of fossil fuels by the Exchequer and to phase out those tax breaks and subsidies which are environmentally damaging   An estimated €4 billion per annum in taxation was forgone through potentially environmentally damaging subsidies between 2012-2016.  These subsidies undermine much of the impact of other environmental taxation measures.  A far more productive use of these funds would be to invest them in the people, households, communities and regions that will be most affected by climate adaptation. 

Funding for Just Transition

Social Justice Ireland has highlighted the importance of investing in a just transition using the additional resources generated from these carbon tax increases. In today’s terms the additional tax revenue will total more than €1 billion per annum by 2030.  This revenue should be invested in a comprehensive mitigation and transition strategy. 

At a minimum such a programme should contain: (i) re-training and support for those communities who will be most impacted by the loss of employment; (ii) support and investment in the circular economy and bio-economy with regional strategies and targets; (iii) investment in the deep retrofitting of homes and community facilities; (iv) investment in renewable energy schemes and in community energy advisors and community energy programmes; (v) policies to eliminate energy poverty; and (vi) investment in a quality, accessible and well-connected public transport network.  One of the fundamental principles of a Just Transition it to leave no people, communities, economic sectors or regions behind.  While Budget 2021 contains some welcome measures, it is regrettable it does not do more to invest in a mitigation and transition strategy.