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Ireland's Carbon Tax and the Fiscal Crisis: Issues in Fiscal Adjustment, Environmental Effectiveness, Competitiveness, Leakage and Equity Implications


  • Frank J. Convery

    (University College, Dublin)

  • Louise Dunne

    (University College, Dublin)

  • Deirdre Joyce

    (University College, Dublin)


Beginning in late 2008, Ireland experienced a fiscal crisis. This resulted in November 2010 in agreement between the Irish government and the European Central Bank, the European Commission and the International Monetary Fund (IMF) – known collectively as ‘the Troika’ – whereby the latter provided substantial financial support, on condition that a number of revenue raising and expenditure reduction targets were met. Also in 2010, a carbon tax at a rate of EUR 15 per tonne of CO2 was introduced, covering most CO2 emissions from the non-traded sectors (mainly transport, heat in buildings and heat and process emissions by small enterprises). This paper describes the features of the tax, recounts the story of its interplay between fiscal adjustment and helping meet the obligations to raise taxes, and implications for competitiveness and carbon leakage, environmental effectiveness and equity issues, and draws some conclusions regarding why it happened, and provides some tentative insights for other countries in a similar situation. The circumstances that resulted in a carbon tax being proposed and subsequently introduced in Ireland include: Leadership by the Green Party; limited public opposition; Government need for the income; supports the Green Economy; support from the academic and wider policy population; exemptions for large emitters (many in EU ETS) and agriculture; effective engagement and good planning... L’Irlande a connu fin 2008 une crise budgétaire qui a conduit son gouvernement à conclure, en novembre 2010, un accord avec la Banque centrale européenne, la Commission européenne et le Fonds monétaire international (FMI) – collectivement dénommés la « Troïka » – dans lequel ce dernier s’engage à lui apporter une aide financière conséquente, sous réserve qu’elle remplisse un certain nombre d’objectifs en matière de prélèvements fiscaux et de réduction des dépenses. En 2010 a été également mise en place une taxe carbone de 15 EUR par tonne de CO2, couvrant la plupart des émissions de CO2 des secteurs hors SCEQE (transport, chauffage des bâtiments et chauffage et procédés des petites entreprises, principalement). Ce rapport décrit les caractéristiques de cette taxe, relate ses interactions avec le rééquilibrage budgétaire et les obligations de prélèvements fiscaux, examine ses conséquences pour la compétitivité et le transfert d’émissions de carbone, son efficacité environnementale et les questions d’équité, et tire certaines conclusions sur les raisons qui ont poussé l’Irlande à faire ce choix, en proposant plusieurs enseignements qui pourraient se révéler utiles aux pays confrontés à une situation analogue. La taxe carbone a été proposée puis mise en oeuvre en Irlande dans un contexte bien particulier caractérisé par : le rôle moteur du Green Party ; la faible opposition du public ; un État en quête de recettes ; la promotion de l’Économie verte ; le soutien des milieux universitaires et des responsables publics en général ; l’exonération des grands émetteurs (inclus pour beaucoup dans le SCEQE) et de l’agriculture ; un réel engagement et une bonne planification...

Suggested Citation

  • Frank J. Convery & Louise Dunne & Deirdre Joyce, 2013. "Ireland's Carbon Tax and the Fiscal Crisis: Issues in Fiscal Adjustment, Environmental Effectiveness, Competitiveness, Leakage and Equity Implications," OECD Environment Working Papers 59, OECD Publishing.
  • Handle: RePEc:oec:envaaa:59-en

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    Cited by:

    1. Jacqueline Cottrell & Damian Ludewig & Matthias Runkel & Kai Schlegelmilch & Florian Zerzawy, 2017. "Environmental tax reform in Asia and the Pacific," MPDD Working Paper Series WP/17/05, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

    More about this item


    ajustement budgétaire; carbon tax; enseignements pour l’action; fiscal adjustment; policy lessons; taxe carbone;

    JEL classification:

    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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