Carbon Taxes Are A Dangerous Distraction

The reformist left play an irresponsible game. They claim to support progressive social change, but they often throw their weight behind policies that are regressive and shortsighted.

The carbon tax is a good example. In Ireland, carbon taxes currently increase the price of a litre of petrol by 20 cents or €10 for a standard tank (50 litres). In addition, they add €180 to a 1000 litre tank of home heating oil, with both taxes set to increase steadily over time.

The argument for the tax is threefold. Advocates argue that higher prices 'nudge behaviour' towards better decisions without taking away people's freedom to choose. They further claim that carbon taxes create an important social signal that our individual behaviour is creating negative consequences that must be reduced overtime.

Finally, advocates argue that the money raised from the tax is deliberately ringfenced for socially progressive policies such as retrofitting homes and preventing fuel poverty. The Social Democrats and the Labour Party accept this logic.

Speaking at their recent political think-in, Jennifer Whitmore argued that "if you're paying for a tax that's ringfenced, its easier for people to understand that the money is being used for good. And from an environmental perspective it's really important that we continue to have this in place".

Gary Gannon fundamentally agrees, arguing in 2022 that opponents of carbon taxes are more interested in 'cheap political points than in taking the climate crisis seriously'. While Ivana Bacik has insisted that "parties that profess to be serious about climate change do not oppose carbon taxes just as parties professing to be socialist, do not oppose taxes on wealth and property taxes".

But is this true? Far from accepting a necessary link between carbon taxes and effective climate action, this article will show that the focus on individual behavioural changes is based on two fundamentally flawed assumptions.

The first is that global capitalism can be successfully regulated away from fossil fuels through individual (market based) initiatives. The second is that, at least some of the burden, should fall on individual consumers to 'nudge them' away from their bad behaviour. Let's look at each of these faulty premises in turn.

The (Petro) Logic of Global Capitalism

Capitalism is a social system that fuses the power of private capital with the political resources of the state. It is a system of class based competition, fought between the owners of corporations and the states that support them.

Fossil fuels play two indispensable roles within this system. On the one hand, they are the central forms of energy required by corporations as they seek to expand their profit-making production; on the other, they are central strategic resources required by states as they seek to expand their power internationally.

It is these dual roles that explain why fossil fuels are so challenging to replace. Cheap and plentiful oil has been central to the complex value chains built by western corporations since the 1970s; and they have underpinned an eight-fold expansion of the global economy since World War Two.

Oil and gas remain vital to industries as varied as agriculture and petro-chemicals, automobiles and plastics. And this explains why capitalism has created more emissions since 1990 than in the history of humanity before that time.

Fossil fuels are equally essential to the world's financial architecture. The Big Three asset managers — Blackrock, Vanguard and State Street — hold well over a trillion dollars in fossil fuel equities between them; while the world's 65 biggest banks committed $906 billion to fossil fuel companies in 2025, an 8 percent increase on the year before.

When the complex interactions between global finance and global production are taken into account, Cedric Durand argues that as much as one third of all current stock market valuation is tied to the fossil fuel industry. This constitutes tens of trillions of sunk capital investment, and it makes the industry structurally 'too big to fail'.

Now look at their role in imperialism. Back in 1945, the US State Department described Saudi Arabian oil as a "stupendous source of strategic power, and one of the greatest material prizes in world history". This 'asset' became even more important in the 1970s, when the US replaced the fixed exchange rates of the post war system with a floating dollar underpinned by oil.

When Donald Trump claims that the climate emergency is a 'giant hoax' he is really gesturing to the link between US power and fossil fuels. It is this same logic that underpins his calls to 'burn baby burn' and why he chose two of the major oil states as the targets for his foreign wars (Venezuela and Iran).

US planners regard their control over fossil fuel as vital to their global supremacy, while the Putin Regime is almost entirely reliant on petro-chemicals for its survival — indirectly shoring up its own alliance with China and Iran.

These imperial war games help to explain why the oil and gas companies have been allowed to relentlessly expand their global production, with just 100 companies responsible for 71 percent of total emissions, the largest 32 companies responsible for over 50 percent.

But this also explains why the world's ruling classes continue to pour vast subsidies into fossil fuel production, with an IMF report from 2024 showing subsidies worth $7 trillion compared to just $170 billion for renewables (a ratio of 40:1).

Back in 2018, thousands of scientists from the International Panel on Climate Change implored world leaders to engage in "rapid, far-reaching, and unprecedented transitions across all segments of society", but instead, our rulers have continued to fight for strategic choke points in the fossil economy while driving ever expanding capital accumulation.

Put slightly differently, it is all too clear that the capitalist classes have no interest in moving away from fossil fuels to reduce CO2 emissions. Instead, they want to create a focus on our individual behaviour while they burn the planet in search of profits and power.

In this context, the 'every little helps' reformism of social democracy is actively unhelpful. It takes the focus away from our dire need to challenge the logic of the system and makes it seem like we can reform our way to effective action 'one carbon footprint at a time'.

This brings us to our second faulty premise: the idea that penalising individual consumers will be an effective strategy for saving the planet.

A Nudge in the Wrong Direction

Carbon taxes are deeply disingenuous. They draw on the behavioural economics of Richard Thaler, who won the Nobel Prize in 2017 for his claim that policy makers should guide people towards better choices while 'fully preserving their freedom of choice'.

But freedom to choose is exactly what people do not have around their very real needs to heat their homes and move efficiently. Oil and gas are defined by economists as inelastic goods.

This means that they have two characteristics that make them hard to move away from: they are essential to our basic needs and they lack real substitutes. People may want to shift away from oil and gas, but electric cars and home heating pumps are vastly expensive.

The wider environment is also hostile, with insufficient investment in the network of charging points, a historic underfunding of user friendly public transport and very little effort to create state led retrofitting at a price people can afford.

In this wider context the nudge turns into a punch. Instead of coaxing changes in behaviour, it infuriates people who see the tax as a sneaky revenue raising measure.

The evidence supports this. Since 2020, when the carbon tax began to increase, there has been no reduction in the numbers of fossil fuel dependent cars on our roads. According to the CSO, there has been a small drop in the relative number of diesel and petrol cars (92-85 percent), but the absolute numbers have continued to increase, from 2.6 million to 2.8 million.

Meanwhile, the number of car journeys as a proportion of Irish travel has actually increased, from 72 percent in 2020 to 75 percent today. In other words, the carbon tax has not shifted our individual behaviour because the cost of switching has been too prohibitive.

The picture in home heating oil is identical. In 2020, there were roughly 700,000 homes that relied on kerosene to heat their homes, and this number has not dropped at all in the intervening years. Instead, families are being asked to absorb higher costs even as the government fails to provide real alternatives or to tackle climate change authentically and effectively.

Since 2020, the government's major infrastructural objective has been to increase Ireland's carbon emissions by attracting the data centres of Big Technology. Since that time, they have facilitated more than 100 of these vast energy dependent centres which collectively increase demand for electricity by roughly 25 percent.

The state also encouraged farmers to increase the Irish dairy herd by 50 percent, despite 38 percent of Irish emissions now coming from agriculture. They also continue to quietly subsidise industrial fossil fuels to the tune of around €5 billion annually, or four times the amount raised by individual carbon taxes.

Meanwhile, the Social Democrats and the Labour Party continue to give the government cover while actively failing to support more radical measures. Just this month, People Before Profit put an amendment to a government energy bill that would have moved the cost of the carbon tax onto big business and stopped a proposed increase in the cost of public transport.

This would have taken one tiny step in the direction of a more 'just transition', but instead the reformist left voted with the government to protect the status quo.

Ivana Bacik might claim that it is only those who support carbon taxes that really care about the climate emergency. In reality, it is only those who really oppose Irish capitalism that are capable of seeing the burning woods from the dying trees.