Solid Fuel Carbon Tax Increase Delayed

In Budget 2020, Minister for Finance Paschal Donohoe announced a €6 increase in the price of carbon as a first step towards the Government’s commitment to increasing the price of carbon from €20 to €80 per tonne by 2030. The increase was applied immediately on auto fuels but the increase to home heating oil and solid fuels will be delayed until May 2020 – after the winter heating season. The Solid Fuel Trade Group (SFTG) whose members account for two thirds on the carbon tax paid on solid fuel had called for a derrogation for solid fuel or at least a delay in the implementation of any tax increase.

Roughly one home in eight or 600,000 people in Ireland depend on solid fuel as their primary form of home heat. The majority of these homes are in rural areas and many are classified as “fuel poor”. Higher solid fuel prices lead to the most disadvantaged going cold
in their homes. St Vincent de Paul estimate that almost half (48%) of these homes went without home heating due to affordability issues in 2018.

Increases in carbon tax on solid fuel also have unintended costly consequences for the environment and Ireland’s international carbon reduction commitments. Higher solid fuel prices lead many consumers to source their solid fuel from ‘grey’ markets where they purchase more environmentally harmful products, such as sod turf and wet wood, increasing particulate emissions and paying no carbon tax or VAT.

There is no carbon tax in Northern Ireland and VAT is charged at 5% versus 13.5% in the Republic of Ireland. This has led to significant price distortions and increasing pressure on wholesale and retail businesses.

SFTG have called on both Revenue and DCCAE to ensure that the trade in illicit, untaxed and higher polluting solid fuels is tackled to protect both the environment and legitimate solid fuel businesses.