As a state broadcaster, you might expect RTE to give two sides of the story when reporting on the Carbon Tax, or any other political issue. But in their interview with Professor John FitzGerald (son of former Taoiseach Garrett – amazing how small Ireland is, right?) of the Government’s climate advisory council, RTE apparently felt that no dissenting view was necessary:
In response to calls for the annual carbon tax increase to be paused, Mr Fitzgerald said carbon tax moves people from dirtier fuels to cleaner energy.
“The dirtier fuels pay more carbon tax,” he said.
Speaking on RTÉ’s This Week, Mr Fitzgerald said: “What the Government has used the money for in the past two years, and what they’ll use it for this year, is compensation for those on low incomes who are badly hit. No tax, no compensation.”
Mr Fitzgerald added that the Government “needs to allocate a substantial amount of money to retrofit social housing”.
Professor Fitzgerald’s logic is impeccable, it must be said. Like all of his late father’s preferred policies, this one works perfectly in theory: You increase taxes on the “dirtiest” fuels, in order to make “cleaner” fuels cheaper. In theory, this means that people buy less dirty fuel, and more clean fuel. And then you invest the proceeds of the tax on dirty fuels into insulating homes, to make sure that we all need to spend less on energy to begin with.
The problem, though, is that it is mostly nonsense in practice, for several reasons.
First, how insulated your home is amounts to just a secondary factor in considering the type of energy that you use. The main factor which determines how much energy you use is the kind of home heating system that you have. You can insulate the home of a person with a solid fuel heating system, and they’ll still need to burn coal, or wood, or peat to heat their home. The same goes for oil, or gas. The tax does not encourage them, as the good professor says, to “switch to cleaner fuels”, because they simply cannot do it. It just punishes them for the heating system which they have – a decision over which, in many cases, they had no control.
The whole point of the carbon tax in theory is that it shifts behaviour – that it is a “nudge” in the right direction. But in reality, it does not do that, because investing in the ability to use alternative fuels is beyond the average household. The people who can afford to do that kind of thing are almost certainly rich enough not to really notice the tax in the first place.
The second matter, of course, is that price is not the only consideration in terms of how much fuel you use. The carbon tax does not avert cold snaps. The carbon tax does, however, punish families at a time when they absolutely must use their heating. There is not much of a “nudge” factor at work for the simple reason (as an economist like Fitzgerald should know) demand for energy is relatively inelastic. This is why the Government puts up the price of cigarettes constantly: People are addicted, and find that they must pay whatever it costs. The demand does not react dramatically to the price. The same is true of energy: It does not matter if coal costs 20euro a bag, or 30euro a bag. If you need it, you have to buy it.
In other words, what the Government has done with the carbon tax is not to create a tax which encourages people to behave differently, but a tax which punishes them for behaving in a way that they have no alternative to. If you need to use fuel to stay warm, you do not have an alternative choice. The Government is not able to provide an alternative choice. Even the plans for “home insulation”, you will note, apply only to social housing, which is a small proportion of the total.
It therefore does not make any sense, as the Professor claims, to say that the Carbon Tax is likely to change behaviours. After all, if it changed behaviours, it would not raise much money.
That’s why the Carbon Tax is a poorly designed piece of legislation, if the aim is to change people’s behaviours. It could only be considered well designed if it was intended to punish people. Which, of course, it absolutely was.