The Government's target to cut carbon emissions by 3 per cent per annum between 2007 and 2012 is "bizarre", inappropriate and should be abandoned, economists from the Economic and Social Research Institute (ESRI) said in Kenmare.
ESRI economists Colm McCarthy and Sue Scott told the Dublin Economic Workshop that a carbon tax of €20 per tonne would be a much more efficient way of reducing carbon emissions because it does not favour any one type of energy-producing technology.
A carbon tax set at this rate would add approximately 5 cent to a litre of petrol, which they said was "hardly punitive".
"The real inconvenient truth in climate policy is that, one way or another, the price of carbon must rise," they said in a paper presented to the conference on controlling the economic cost of climate policy.
A universal carbon tax, where everyone pays the same price for each unit of damage they do, would be fairer than setting specific reduction targets, Mr McCarthy said. Ideally, this tax would be introduced gradually, starting at a rate of €5 per tonne.
He also called for a comprehensive economic study to examine the cost of the Republic's ban on nuclear energy, and questioned the economic rationale behind the Government's target to source 33 per cent of power from renewable energy by 2020, which will require a sharp increase in wind penetration.
Ms Scott said carbon emissions should be reduced in the most economically-efficient manner but not enough attention had been paid to these costs.
Tax breaks on biofuels, which risk pushing up food prices by encouraging farmers to use land to produce alternative energy instead of food, are "a very good example of what you end up with if you don't do any economic analysis".
Laura Slattery
The Irish Times
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