Virtue Could Have its Own Reward! ESRI shows that a properly implemented carbon tax could simultaneously reduce greenhouse gas emissions and benefit the economy.

22/07/2004

Virtue Could Have its Own Reward! ESRI shows that a properly implemented carbon tax could simultaneously reduce greenhouse gas emissions and benefit the economy.

In a study for the Environmental Protection Agency (EPA) the ESRI examined the potential effects on the Irish economy of the use of carbon taxes or tradable emissions permits to reduce greenhouse gas emissions.

The report shows that:

• The availability of revenue for the government from the schemes and the use made of this revenue will determine the schemes’ ultimate economic impact.
• If the revenue from carbon taxes or the sale of emissions permits were used to reduce taxes on income, the economy might actually be better off.
• The current EU emissions trading regime, which starts next year, is seriously defective because it provides for most permits to be given away free. As a result, the government will have no revenue to cut taxes elsewhere to preserve competitiveness or to compensate disadvantaged households.
• To ensure an efficient and equitable outcome all sectors should face similar incentives to cut emissions, whether through a carbon tax or tradable permits.
• Without a rise in prices, either through carbon taxes or a scheme of tradable emissions permits, Ireland will not meet its obligations under the Kyoto protocol.