In his December budget Irish finance minister Brian Lenihan introduced a carbon tax equivalent to €15 per tonne.
Lenihan said the new tax would help alleviate the Irish budget deficit and encourage companies to make the transition to a low carbon economy.
He said: “This will encourage innovation by incentivising companies to bring low carbon products and services to the market.”
Industry reaction
IDIA director, Michael Barry, disagrees, claiming that the dairy industry needs revenue to innovate, and that the tax will just benefit food imports and put domestic jobs in danger.
Barry said: “The dairy industry supports the ambition to create a low carbon economy in Ireland, but the revenues collected from a carbon tax must be used to reduce costs for business.
“This tax would do little to enhance overall sustainability and risks giving advantage to cheap food imports.”
Scope of tax
The new carbon tax will have an impact at all stages of the food production process.
Barry said: “The farmer will pay a carbon tax on the fuel used in producing the food; the transportation of raw materials will be taxed; food processing will be subject to a carbon tax and packaging, storage and distribution will be taxed.”
The next result, according to the industry spokesperson, is that the cost of domestically produced food will increase relative to imports, giving foreign domestic dairy producers and processors a competitive disadvantage.
The carbon tax was introduced in December following a disastrous year for the Irish economy. GDP fell by around 7.5 per cent in 2009, plunging Irish public finances to crisis point.