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Gas & Electricity guide

What is the carbon tax?

What is the carbon tax?

As issues around the environment and climate change come to the fore in public debate, we're hearing more and more in the news about carbon tax. So what exactly is it and how does it impact on your pocket?

The carbon tax is a charge applied to carbon-emitting fuels such as coal, peat, oil and natural gas. Introduced in 2010, the tax is intended to reduce carbon dioxide emissions and is part of Ireland’s strategy to support a greener and cleaner environment.

The charge is currently €26 per tonne of CO2 emitted by the fuel concerned, meaning more polluting fuels are taxed more. The rate was increased from €20 per tonne of CO2 in the 2020 Budget. However many environmental campaigners have called for the tax to be increased significantly and the Government has set a target of €80 per tonne by 2030.

The charge of €26 already applies to petrol and diesel while the previous charge of €20 will continue to apply to other fuels until May 2020. 

However according to the ESRI, the real cost of carbon, if accounting for its warming impact, is likely somewhere in the range of €150-€200 per tonne, which, if implemented, would drastically increase our gas, driving and heating costs.   

What does the carbon tax cost me on my gas bill?

Natural gas suppliers in Ireland, such as Bord Gáis Energy, Electric Ireland and Energia, are all obliged to add a carbon tax charge to all customers' bills, which will work out at 0.55 cent (including VAT) for every kWh of gas used when the increased rate takes effect in May.

Considering that the average Irish household uses 11,000 kWh of gas every year, the carbon tax will add around €61 to your annual natural gas bill, which works out at around €10 on every bi-monthly bill.

Carbon tax is not applied to electricity bills (although here there is the PSO levy).

Petrol and diesel 

At the moment the carbon tax adds around 6.5 cent to every litre of petrol and diesel. Of course this is on top of VAT and excise duty which add another 80 cent or so to a litre of petrol and 70 cent to a litre of diesel.

Where else am I paying carbon tax?

If you’re a big fan of a blazing fire fuelled by coal and briquettes, you'll probably have noticed a couple of hikes on the price of these fuels over the past couple of years. You guessed it – carbon tax is fuelling those increases too.

A bag of coal is currently made up of around €2.10 in carbon tax, with this increasing to just over €2.70 in May.

Meanwhile the carbon tax on every bale of briquettes equates to around 45 cents at present, increasing to almost 60 cent in May. 

How much is the carbon tax costing me?

As mentioned above, the carbon tax will add around €61 to your annual gas bill based on average usage. However if you're in a poorly insulated home or a building with more than three bedrooms, it'll cost you more. 

Based on the fact that the average Irish motorist drives around 17,000km a year in a petrol vehicle and 24,000km in a diesel vehicle, the tax is adding around €61 a year to your driving costs if you have a petrol car and €72 a year if you're driving a diesel car (based on 5.5 litres per 100km for petrol vehicles and 4.6 litres per 100km for diesel).   

The carbon tax brought the price of a bale of briquettes up from about €4.50 to roughly €5. Let’s say you get through one bale on a cold night and let’s pretend there are only 90 cold nights a year in Ireland (optimistic, I know!) With this usage, you’re spending around €45 more on briquettes than you were in 2009 due to the carbon tax.

And that’ll burn a hole in anyone’s budget.

Will a carbon tax solve our climate change problem?

It depends.

Critics will argue that the tax hasn't radically changed people's behaviour in the countries where it's been introduced and that it's merely yet another tax on hard-pressed consumers.

Supporters will argue that it's the only way to encourage both businesses and consumers to move away from carbon-intensive fuels and to place the planet on a more environmentally sustainable path going forward.   

The truth probably lies somewhere between the two.

Whether we like it or not, the polluter pays principle means a carbon tax is going to form a core part of Ireland's climate change strategy over the coming years. However the Government should seek to reward those who make more environmentally conscious choices and invest in things like proper public transport and green energy before increasing the tax.

Quite simply, alternatives to carbon need to be out in place first before the Government starts to penalise those who use it.      

How can I save?

Using wood to fuel your fire and maybe investing in some woolly jumpers to keep you warm on chilly evenings will help reduce your heating costs. Also changing to an electric or hybrid car will reduce your driving fuel costs.

However, the best and easiest way to save is by reducing your gas consumption and checking to see if you’re on the best rate out there.

You can compare natural gas prices on now. Happy saving!


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