On 25 May 2012, the Irish Government terminated the carbon levy legislation with immediate effect, so that the price of electricity to customers would not increase due to the levy. This termination followed a February 2012 decision of the Irish Supreme Court, by a three-two majority, which would have allowed electricity companies to pass on the new carbon levy resulting in an increase in the price of electricity to customers.
In 2010, the Irish Government imposed a carbon levy on the generation of electricity from fossil fuels. The purpose of the legislation was said to be an attempt by the government to recover revenues received by electricity generators from free carbon allowances.
Somewhat predictably, the electricity generators then sought to pass on the cost of the carbon levy in their prices to customers. The Irish energy regulator prohibited the inclusion of the costs of the levy in the price to customers. In its February decision, however, the Supreme Court set aside the prohibition by the regulator on adding the carbon levy to electricity prices. The Court said that prices must reflect the generators’ costs, as required by Irish electricity generating licences.
The levy had raised an estimated €75 million for the exchequer in 2011 and a further €45 million between its implementation in July 2010 and the end of 2010. The Government’s swift action in repealing the carbon levy on fossil fuel electricity generation has been broadly welcomed by industry