Historically, desperate times have called for desperate measures. Governments facing economic collapse have often gutted important programs that focus on the long view in favour of immediate monetary stimulation (i.e. encouraging consumption). But when Ireland’s economy collapsed in 2008, the government saw an opportunity to enact a smart carbon tax that would benefit not only the economy but also the environment. According to Elisabeth Rosenthal of The New York Times:
The government-imposed taxes on most of the fossil fuels used by homes, offices, vehicles and farms, based on each fuel’s carbon dioxide emissions, a move that immediately drove up prices for oil, natural gas and kerosene. Household trash is weighed at the curb, and residents are billed for anything that is not being recycled…The Irish now pay purchase taxes on new cars and yearly registration fees that rise steeply in proportion to the vehicle’s emissions.
The Irish have not completely changed their ways (they still consume more similarly to Americans than Scandinavians) but they have altered their habits very quickly. After the tax came into action citizens changed the types of cars they drove, the types fuel they used and even took recycling much more seriously, helping the country quickly smash through its carbon reduction target and reduce its deficit. Rosenthal continues, “The three-year-old carbon tax has raised nearly €1b ($1.3b USD) overall, including €400m in 2012. That provided the Irish government with 25% of the €1.6b in new tax revenue it needed to narrow its budget gap this year and avert a rise in income tax rates.”
Not everyone is happy—the resulting price hikes cause problems for low-income populations, to the point where some are calling it a scam—but at least the tax has the merit of trying to do some good with the measure instead of going for plain and simple austerity.