On Friday, Leo Varadkar told the media that most parties in the Dáil agree to raising carbon tax, and that it was being discussed as part of the trilateral government talks. What he didn't mention was that the Greens also want a fairer model that doesn't punish ordinary households.
It's not just us.
Last year, the US House of Representatives commissioned a report looking into fee and dividend as a possible model for enforcing carbon pricing. Led by the director of climate science at Columbia University, the report was entitled 'Why Fee and Dividend Will Reduce Emissions Faster Than Other Carbon Pricing Policy Options'.
Carbon pricing: the domestic picture
Taxing carbon emissions was considered by the Fianna Fáil government in 2005-6, and eventually entered legislation in 2008 during the Fianna Fáil-Green Party coalition. Like most countries, Ireland expected to see carbon taxes increasing as the market scrambled to provide low-emission alternatives. However, this low-carbon marketplace never materialised to the extent anticipated and carbon taxes have been seen in Ireland as a regressive consumption tax rather than a nudge towards behavioural change.
In 2016, the Green Party succeeded in establishing a Citizen's Assembly on climate action, which included a critical appraisal of the carbon tax. Sitting in 2017, the Assembly supported "higher taxes on carbon intensive activities" but was very specific about protecting vulnerable households and using the money to decarbonise.
The Citizen's Assembly published its recommendations in April 2018 and was prescriptive in its stipulations for carbon pricing:
On receiving the report of the Citizen's Assembly here, the Oireachtas immediately set up a committee to turn the report's recommendations into policy.
While the Assembly had been a Green idea, neither the Citizen's Assembly nor the Joint Oireachtas Committee on Climate Action (JOCCA) were Green Party talking shops. There were 25 TDs/Senators involved, including representatives from Fine Gael, Fianna Fáil, Labour, Sinn Féin, Solidarity-PBP and a number of independents.
Its report - 'Climate Change: A Cross- Party Consensus for Action' - was published in March 2019 and examined a number of carbon pricing models, it specifically mentions fee-and-dividend as best practice.
Why fee and dividend?
Fee-and-dividend is different from the current carbon tax in that revenues are not spent by the state, but parcelled back out to households. Taxing high-carbon activities therefore becomes a redistributive measure that puts money back into the pockets of the most vulnerable households.
According to Hansen and Miller in the US, the fee-and-dividend model would see 70% of households get more money back than they pay in. This offsets the increased cost of goods and services (caused by carbon taxes on elements of the supply chain) and ensures that essentials are still affordable even for low-income consumers. It also ensures nobody is put into fuel poverty by carbon pricing.
Instead, the pressure for behavioural change is on industry, where decarbonising can confer a cost advantage, and on high-income households who will be incentivised to fly less and choose cleaner cars.