Budget 2020 Includes 30% Increase in Carbon Tax

The present government has committed to transitioning to a low carbon economy and part of the suite of financial instruments intended to curb the use of fossil fuels is the escalation of the carbon tax from its pre-budget price of €20 per tonne, to €80 per tonne in 2030.

Carbon tax is paid by the end user for fossil fuel usage including petrol, diesel, home heating oil and natural gas. Each type of fuel contains different quantities of carbon and so the lower carbon output fuels result in lower carbon taxes than higher output fuels e.g. the carbon output from natural gas is lower than home heating oil, so the net carbon tax paid by the end user is lower for natural gas than home heating oil for the equivalent amount of energy consumed.

Budget 2020 has set the ball rolling with a carbon tax increase of 30% i.e. the pre-budget carbon price of €20 per tonne has been increased to €26 per tonne. The increase has been applied immediately to transport fuels with increases for other fossil fuels postponed until after the present heating season i.e. the increases will commence in May 2020 for non-transport related fuels.

For medium sized natural gas consuming sites with an annual natural gas spend of circa €50,000, previous annual carbon tax costs would have been circa €4,633 per annum (9% of the total annual bill).

Within this example, the latest increase will cause overall annual costs to increase by just under 3% (allowing for the same cost of fuel and other associated fuel costs) from €50,000 to €51,390.

According to the Ministers Financial Statement, it is intended that the carbon tax will increase steadily to 2030 when it will reach €80 per tonne.

In the above example, this has the effect of increasing the annual natural gas cost from €50,000 to €64,000 per annum in 2030 – a 28% overall cost increase from the €50,000 baseline.

In fact, based on this profile, an additional €84,000 will have been paid by this one site in additional carbon tax charges from next year up until 2030.

The purpose of the carbon tax is to reduce fossil fuel usage and carbon output through a combination of fuel switching and encouraging energy efficiency. If you wish to speak to us about how to reduce your exposure to the forthcoming tax increases and reduce your carbon output now, contact me at John.Kane@energy-ts.com

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