Green diesel has traditionally been around half the price of ordinary road diesel, due to favourable tax treatment. The price goes up in line with the oil market and there had been an upswing earlier this year, moderated in recent months. But it also rises with the carbon tax, currently €33.50 per tonne. The tax was increased by €7.50 in the budget last October and green diesel rose 1.5c/l as a result, as did other fuels. Another increase in carbon tax is highly likely in Budget 2022. How far could the carbon tax go?
Chances are there will be an increase at about the €7.50 level every year for the foreseeable future. Calculations of the ‘correct’ level for a universal carbon tax, if there were ever to be one, often come in at around €100 per tonne, believed to be the figure most consistent with a net zero target for carbon emissions, and it would take nine budgets to get there at an annual pace of €7.50 per budget. Last year’s increase of 1.5c/l could be repeated each year to the end of the decade.