Clean energy poverty tax – How to avert it

By Tom Spencer. Editor of IrishEVs, a site dedicated raising awareness about electric cars, lifting the myths and misinformation that surround them, and highlight the role that they can play in reducing Ireland’s emissions. This article looks at clean energy.

For more information on IrishEVs visit www.irishevs.com or @IrishEVs on Twitter

In the past week, the Centre for Research into Energy Demand Solutions published its research into the best ways to change consumption to cut carbon footprints, highlighting that switching to a battery electric vehicle was the second most impactful after living car-free.

While IrishEVs fully supports the aim of living car-free, we know that it is a difficult genie to put back in the bottle – especially when car-free alternatives require significant investment in urban planning, public transport, and a cultural shift away from consumerism.

In Ireland, with such a rural population, having personal transport is also seen as something of a necessity – hence our championing of EVs.

However, in today’s blog, we want to highlight the urgent need for government support to ensure that there is not an increase in energy poverty and to avoid electric cars and renewable energy being the reserve of those who can afford to adapt while those who cannot afford it are left behind and taxed as a consequence.

Clean energy: What is energy poverty?

In simple terms, energy poverty relates to a household being unable to attain acceptable standards of warmth at an affordable cost.

Typically in Ireland, a household is considered energy poor if it spends more than 10% of their disposable income on energy costs –according to the Department of Communications, Climate Action & Environment.

However, this definition can be misleading and often overlooks the consequences of energy poverty, such as use of food bands, debt, and lack of available transport funds.

For example, someone living in energy poverty may have to choose between heating their home or being able to afford to drive to work.

The consequence of which is that they may have a considerably longer commute via public transport – particularly where their children may also have school or childcare requirements.

This can further limit the potential to earn and continue the poverty cycle.

How might the clean energy revolution increase energy poverty?

While the clean energy revolution is fundamental to overcoming the climate crisis, it also requires that those converting have the funds available to invest upfront as the initial outlay is expensive but provides quick returns and is soon into net profit.

This applies to both renewable energy and electric vehicles. 2020 is an incredibly important year for electric cars, as it is the first time that we have seen that their retail price is on a par (or, in some cases, lower) with their petrol and diesel counterparts.

Yet, despite running costs being 74% lower, this still requires that consumers have either upwards of €25k available to them, or a good credit rating to secure finance, in order to make the switch.

While we will see costs continue to fall in the coming years, it is clear that the rich and the middle classes will be able to adopt zero-emissions personal transport and renewable energy before those with lower or more vulnerable incomes.

As such, there is significant potential those who do not have disposable income, savings or high credit ratings to take advantage of the tax breaks that the Irish government offer for EVs or renewable energy.

This is a common trend worldwide and was the subject of a 2019 research project conducted by Portland State University.

Ultimately, without government support, the inequality gap will continue to grow and will be further exacerbated by the upcoming ban on internal combustion engine vehicles in 2030 – as necessary as that ban is in order to fight the emissions and climate crisis.

Taxing those who cannot afford to adopt clean energy and zero-emissions transport is not the way forward.

What can be done to avert this?

In addition to robust government funding to increase the nationwide adoption of electric vehicles and renewable energy, we must ensure that the Irish government sets aside specific funding for lower-income households to support them in adapting.

The burden of change should not be placed on their shoulders, and we must recognise that it is a requirement of the State to take action on the climate crisis for the benefit of all citizens and the environment.

We have already seen legal action in the Netherlands where their national government was deemed to be failing on this front.

As such, we must ensure that there is a sliding scale of funding available to all Irish citizens to help them reduce their carbon footprint, incentivising change rather than taxing inaction.

This is a conversation that needs to be held at a nationwide level, with multiple stakeholders representing the many charities who help the people in greatest need of support in Ireland every day.

This conversation has not yet started but is more urgent than ever.

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