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Money Times - 23/09/09

Posted by Jill Kerby on September 23 2009 @ 23:22

 

TURN THE TABLE ON WATER AND CARBON CHARGES

 

Two of the four headline tax changes recommended in the recently published Taxation on Commission report – the introduction of a carbon tax and water charges – have a more likely chance of being introduced in the next Budget than, say, the flat rate property tax and perhaps even the taxing of child benefit. (On the latter, even the Commission couldn’t seem to agree whether it should be taxed or means-tested.)

The reason for this is that these are stealth taxes – they get added to existing bills for electricity or oil or gas or briquettes and in the case of water they can get tacked onto existing local authority bills for bin charges or other services. 

If the Commissions recommendations are heeded, it will mean that the taxes and charge will probably be phased in over a five-year period in the case of the water charge, based on a flat rate charge but moving to a charge per use as meters are put in place.  The carbon taxes will most likely be put in place much sooner, with the tax amounting to about eight cent per litre of petrol and diesel and  - which works out at about €20 per tonne.  Since their recommendation is very similar to the 2007 report on carbon fuels by the Department of Finance it means we could expect the cost of motor fuels to go up 7.4%, the price of a bale of briquettes to rise by 52% and a €2.38 rise in the cost of a 40 kilo bag of coal.

The cost of installing the water meters is horrific – between €400m and €450m over five years, a cost that “can be passed onto the consumer” says the Commission and they also note that we are amongst the most wasteful water users – by more than 30% the EU average -  and carbon emitters in Europe.

Some people would counter that we use more water because we have proportionately greater access to water, but a large part of out “wastefulness” is due to the fact that local authorities have no direct responsibility to provide services to their communities; an antiquated, leaking water delivery system and a general lack of awareness about the need to conserve finite resources (like water, even here.) 

That said, there are ways to cut down and carbon emissions and conserve water and ways to actually make some money on foot of both these developments. 

First – conservation: until a meter is installed in your home, start preserving water by

putting a brick in the toilet cistern; 

banish baths for all but the smallest members of the family;  

limit showers to no more than four or five minutes; 

buy a good water filter jug and keep it filled with water in the fridge and encourage everyone to drink this water rather than let the taps run to fill a glass when thirsty;

only boil the necessary amount of water for coffee or tea (this also saves electricity); 

don’t use more water than you need for dishwashers, washing machines or for car washing;  Keep a water butt in the garden to catch rainwater for plants and gardens. 

On the carbon front, you need to try and get your home as energy efficient as possible by lagging water heaters; laying down insulation in roofs and attics; draught proofing windows and door and then reconsidering even the kind of fuel you use as heat.  Sustainable Energy Ireland – www.sei.ie - is the place to go for guidance and to apply for grants for as long as they last. 

And while the introduction of these charges and taxes is going to be unpalatable for people who are struggling to make ends meet, the focus on energy sustainability and water conservation is also an investment opportunity – albeit one considered in the higher risk category - for anyone who is looking for a longer term investment opportunity. 

Sustainable investment funds that target new ‘green’ energy options (like wind, solar, biofuels, geothermal, etc) are available from most fund managers and also in the form of low cost Exchange Traded Funds. RaboDirect.ie has just launched three very interesting “Sustainable” funds – water, energy and climate change -that have outperformed similar funds in the sector and have produced excellent returns this year. There are no entry costs and the funds carry a 1.5% annual management fee and 0.75% exit fee. KBCAM fund managers ‘Innovator’ energy and water fund, which was launched a few years ago is also worth checking out. 

If you have money to invest, especially for the long term and are interested in these new sectors, do your own research and carefully read the different fund manager’s syllabus’; speak to an independent advisor and be very careful about the size of fees and charges. With markets rallying for seven months, some commentators believe a correction is due soon.  Make haste slowly and be sure to check out equivalent shares and sectors in a low cost ETF equivalent. 

 

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