ENVIRONMENT Minister John Gormley yesterday delivered the first carbon budget in the history of the State — the first of its kind in Western Europe — claiming it marked the moment climate change moved to the heart of government.
The Green Party leader yesterday spelt out the detailed measures needed in 2008 to implement Tánaiste Brian Cowen’s budget announcement that carbon dioxide emissions in Ireland will fall from 70 million tonnes to 64 million tonnes, on average, between now and 2012. To put them into effect, Mr Gormley announced radical changes in the motor tax calculation, new energy efficiency standards for light bulbs and mandatory environment labelling for new cars from next July.
Outlining the carbon budget in the Dáil, Mr Gormley said Ireland must put a price on carbon.
However, the minister was not in a position to say if a carbon tax will be introduced next year.
A new Commission for Taxation has been charged with looking into this question but no date has been given for the completion of its work. Mr Gormley insisted yesterday that it would be established as a matter of urgency early next year.
Mr Gormley also accepted that even with the ambitious reductions, Ireland would still need to buy some carbon credits.
“If we can achieve the 3% annual reduction on average between now and 2012, we will need to purchase only 1 million carbon credits on average each year. Such a reduction is a challenge but we are determined to meet it,” he said.
There was also a strong sustainability aspect to the housing programme announced by Housing Minister Batt O’Keeffe yesterday.
He said with €1.7 billion in funding, it would allow the acquisition of, or starts on, about 9,000 houses. Mr O’Keeffe revealed projects would be “sustainable community proofed” and also stressed the regeneration being carried on, in particular in Limerick.
About €50 million will be provided for affordable housing partnerships helping about 500 home purchasers.
In addition, the shared ownership scheme is being changed to a shared equity scheme to boost participation.
The new scheme will make the process less burdensome on the prospective home-owner.
How will motor tax change?
At present the different motor tax bands are based on engine size.
In his speech on Wednesday, Finance Minister Brian Cowen said the tax would be increased by 9% and 11% for cars over 2.5 litres.
Yesterday, John Gormley announced that motor tax will also be calculated on the same basis as vehicle registration tax. So the amount of tax you pay on your car each year will depend not on engine size but on how carbon efficient your car is.
There are seven bands (A to G) based on CO2 emissions. Each new car will get a label telling you its efficiency. If your car is A-rated it’s a Toyota Prius. If it’s G-rated, it’s a Mercedes or a Range Rover.
How will it be calculated?
Those who have gas-guzzlers will pay more. The maximum car tax payable at present is €1,343 a year for cars over 3 litres.
Under the new bands the maximum payable will be €2,000 a year for cars that emit over 226 grams of CO2 per kilometre. If you look at the limousines used by ministers, every one of them will at the maximum G-band of €2,000, including the Mercedes cars of Taoiseach Bertie Ahern and six ministers; the Lexus cars used by two ministers; the Volvos used by two ministers and the Audi A6 used by Mary Harney. There are two exceptions — both Green ministers use Toyota Prius cars. which are A-rated — thus motor tax is only €100 per annum.
So motor tax will be paid on a sliding scale based on carbon emissions. In general, diesel cars will benefit. For example, one of the BMW 3 series saloons (diesel naturally) emits only 128 grams of CO2 and the motor tax will be only €150 per annum.
If you take the average family car (the 1.6 litre petrol saloon) most emit between 170 and 180g of CO2 per km giving a tax bill of €600 per annum, which is a €200 hike.
Will it affect second-hand cars?
No, unless they are being imported. The new motor tax will apply to new cars only. Environment strategists argue it’s better to start with a clean sheet. Proper CO2 labelling of cars started only in 2005. It was suggested yesterday that second-hand cars could be tested for CO2 emissions when getting the NCT but Mr Gormley said it was not possible to do this properly.
The fact that the new bands for both motor tax and VRT will be delayed until July has led to postulation that it may have a short-term impact on the car market. Some say the sale of high-powered SUV and other cars will rise between now and July to escape the punitive 36% VRT tax and higher motor tax. Others say many will wait until after July so they can save buying more efficient cars.
Experts like Conor Faughnan of the AA are not unduly concerned. He said these problems will iron out in the long term and the majority of the new fleet will be carbon-rated vehicles within five years.
Will it make a difference?
Yes and no. The new VRT and motor tax bands will dissuade many mid-market buyers from buying gas-guzzling cars. The motor price hikes will probably not affect those buying cars worth over six figures, though the higher VRT rate may give some pause for thought. In general, the new system will persuade most motorists to think of their cars in terms of carbon efficiency.