The Green Budget

The Renewed Programme for Government may reflect the shifted balance of power. The document surely has a lot of green language. Italics are my comments.

We will revise our Capital Investment programme to take into account new budget realities and the need for us to meet our mandatory climate change emissions reduction targets.

Code for slash investment except in energy and public transport.

Introduce new targeted and efficient taxation policies which encourage sustainable enterprise development and the creation of sustainable employment in the Green and Smart Economy.

Code for tax breaks for companies that adhere to Green Dogma?

We will extend our system of Accelerated Capital Allowances to develop the Green Economy into areas such as renewables, waste disposal and water usage.

Sure. Tax breaks for companies that are friendly with greens.

Introduce Carbon Tax in Budget 2010. The principles underlying the carbon levy to be introduced in 2010 will be:

  • those most at risk of fuel poverty will be protected,
  • we improve the fuel efficiency of our current housing stock,
  • the relative tax burden on labour will be reduced.

I’m in favour of a carbon tax, and for using the revenue to cut labour costs and increasing benefits to compensate low-income households. Using the revenue to improve the housing stock is bad policy (double regulation).

Introduce charging for treated water use that is fair, significantly reduces waste and is easily applied. It will be based on a system where households are allocated a free basic allowance, with charging only for water use in excess of this allowance. In keeping with the allocation of greater responsibility to local government, Local Authorities will set their own rates for water use.

Water charges are clever, but require water meters. Bilinear taxes are a bad idea.

We will mandate the €200 million “Green Fund” established in AIB & BOI to prioritise the following activities:

  • Help existing mechanical/electrical engineering firms to become Energy Services Companies (ESCOs) providing managed energy services to public buildings by providing capital to install equipment on client sites;
  • Supplement the grants schemes run by Sustainable Energy Ireland (€50m Home Energy Scheme) by lending to homes and businesses that are retrofitting energy efficient equipment in their homes/businesses.

This is meddling in supposedly independent, commercial enterprises. It is also picking winners. Bad idea.

Participating institutions in NAMA will be obliged to offer a deposit account to consumers which will be ringfenced for lending to Green projects.


We will put in place new public procurement procedures and guidelines to ensure that green criteria are at the centre of all state procurement.


We will ensure that new public procurement guidelines for food include criteria based on giving greater weight to sustainable local produce, seasonal menus and organic production, building on good practice in other EU countries in this area.

More expensive food for civil servants.

We will prioritise research and technologies that offer strong development opportunities in the area of water management, leaks, measurement, metres etc.

This is mature technology. Little need for research.

We will work with the ESB and international motor companies to see a deployment of some 6,000 electric vehicles over the next three years.

Too much too soon. And isn’t ESB a commercial company?

We will present a plan for a high voltage off-shore electricity grid as part of the wider European electricity ‘Supergrid’ so that in the future we can become an energy-exporting nation.

Never mind that production costs of electricity in Ireland are higher than elsewhere.

We will introduce new energy demand reduction targets for energy utilities, thus allowing the customer to “save as they pay” through energy efficient measures.

Double regulation. A carbon tax will do just that.

Ensure the achievement of the target of 5% of land in organic agriculture and meet the growing demand for domestically produced organic produce by providing adequate resources and supports for the achievement of the target, with a focus on import substitution in areas where Ireland is under producing at present e.g. horticulture. Beginning in 2010, and rising in subsequent years, stepping up supports for the Organic Farming Scheme for conversion to organic production, Capital Grants for the Organic Sector and Non-Capital costs.

Interesting language. There is an apparent demand for organic produce, but supply needs to be supported nonetheless.

Declare the Republic of Ireland a GM-Free Zone, free from the cultivation of all GM plants.

Green Dogma.

We will overhaul and significantly enhance the current range of programmes and supports to facilitate the attainment of the target of 17% forestry cover by 2030 and contribute to meeting our climate change

The Emerald Isle will be greener still, and will be renamed as the Emeralder Isle.

We will Continue the record levels of investment in water infrastructure, creating and supporting thousands of jobs in the provision of quality water and the prevention of pollution in rivers and groundwater.

This is hard needed for drinking water. Surface and groundwater quality are okay, and improvement can wait.

We will reduce water leakage from municipal systems in line with international best practice.

More investment in water infrastructure; less money for the rest.

We will place a cap on incineration capacity to prevent waste being drawn to incineration which could otherwise have gone to recycling, having regard tothe recommendations of the International Review of Waste Policy.

Green Dogma.

We will use producer responsibility to reduce levels of packaging waste generated and increase the target for recycling of such waste to 75% by 2013, in line with the recommendations of the international review of waste policy.

Higher costs for producers, higher prices for consumers.

We will introduce preferential parking/charging spaces for electric cars.

Micromanagement, double regulation, badly targeted regulation.

We will allocate a significant portion of the budget on road improvement projects to the provision of new footpaths to allow pedestrians to walk in greater safety and comfort.

Hoping that the commuter belt will walk to work?

We will reverse the CIE policy of excluding and limiting bicycle carrying capacity on interurban trains and buses and ensure all new train units have a more extensive bicycle carrying capacity.


We will develop a Bray to Balbriggan cycle and pedestrian route, and other similar routes such as Oranmore to Barna, as major tourism and commuter facilities.

Oh Ireland. One was thinking that one was reading the renewed programme for the NATIONAL government, but one mistakenly picked up the programme of the village council.

We will raise awareness of Building Energy Ratings (BER), by making it mandatory to display BERs wherever a property is advertised for sale or to let, including signage and printed/online advertising.

This is an interesting one. At present, one must have a BER if one wants to sell or let a house but one is under no obligation to show the BER to anyone, least of all the prospective buyer or renter. This is a good move.

McCarthy on the Green New Deal, Tol on the carbon tax

Colm is not impressed in today’s Irish Times

This continues the earlier discussion in this house

He also comes out in favour of a carbon tax, which I discuss at another page of the same newspaper

Distributional implications of a carbon tax

In a paper just published in the ESR, Verde and Tol study the implications of a carbon tax across the income distribution. The paper by and large confims previous work (Callan and others being the most recent). A carbon tax is markedly regressive. It disproportionally hits poorer households. That said, the scale of the carbon tax is modest (euros per week) and small relative to income taxes and benefits. That means that the distributional damage can easily be repaired (should our dear leaders be so inclined).

The paper adds to previous research by also quantifying the indirect effects of a carbon tax. (This was last done by Cathal O’Donoghue for 1987.) A carbon tax increases the price of energy (direct effect) and thus of everything else (indirect effects). The paper shows that the indirect effects are small relative to the direct effects, and thus hardly affect the regressivity of the tax. The paper also shows that a carbon tax abroad would have a similar impact on Irish households again.

Commission on Taxation: Water charges

The Commission on Taxation recommends that water charges be introduced. High time. Giving away a valuable resource has never been smart.

There are two additional recommendations by the CoT.

Water charges should come in two types: Flat rates for those without meters, and volume-based rates for those with meters. If the flat rate would be set at approximately the average volume-based rate, then a substantial fraction of the population would have a reason to install a meter. If the flat rate is then adjusted to the average volume-based rate OF THOSE WITHOUT METERS, meters will soon be installed everywhere. If not, there will be a subsidy flow from those who save water to those who do not.

It’s a pity that water data are so poor that we do not even know the average drinking water use per household with some degree of confidence.

The CoT also recommends that local authorities be local monopolies in supply, and that the price be regulated, presumably by a new Commission on Water Regulation. Old habits die hard.

Commission on Taxation: Carbon tax

The report of the Commission on Taxation can be downloaded:

This thread is on their proposals for a carbon tax. Others will open threads on other aspects of the Commission on Taxation.

The Commission on Taxation proposes a carbon tax. Here are some crucial elements:

Level: Roughly equal to the CO2 permit price in the EU Emissions Trading Scheme (€15.24/tCO2 today)

Scope: Non-ETS CO2 only

Revenue: Earmarked

On the level of the tax, with the carbon tax equal to the permit price, we reduce carbon dioxide emissions at the lowest possible cost. This is good. At the same time, the level of the tax is set by the market rather than by some politician. This is good too. There is the worrying suggestion of a floor to the tax, but this is fine as long as that floor is set low.

Scope: CO2 in the ETS is exempted as it should. Taxing CO2 in the ETS would be double regulation, and every tonne of CO2 reduced in Ireland would be emitted elsewhere in Europe. Non-CO2 greenhouse gas emissions are exempted too. This is the only pragmatic way forward at the moment, although economic theory strongly recommends that this exemption should be phased out at the earliest opportunity.

Revenue: The Commission on Taxation got it wrong here. They recommend that tax breaks for energy efficient capital be continued, and that companies in a voluntary agreement on energy efficiency. The tax break is double regulation. The Accelerated Capital Allowance on energy efficient equipment should be abolished. The voluntary agreements on energy efficiency should also be abandoned. Voluntary agreements are a weak policy instrument. The CoT essentially allows industry to choose between two regulatory regimes.

By the same token, the CoT does NOT recommend that other energy subsidies be abolished — particularly the Greener and Warmer Homes. Again, this is double regulation, unnecessarily increasing the cost of emission reduction and introducing distortions and opportunities for rent seeking. This is an opportunity missed.

The CoT does recommend that VAT on energy-efficient goods be lowered. This is triple regulation!