Failure to decarbonise the economy would lead to declines in gross domestic product , investment and consumption expenditures, while labour market outcomes would also deteriorate, according to a report by the Economic and Social Research Institute
The costs stemming from the higher carbon tax and the EU Emissions Trading System price have contractionary economic effects, further reducing real GDP by 0.7 and 1.1 percentage points respectively compared to the GDP impacts of higher energy prices. The impacts of the higher carbon tax are especially strong for the aggregate mining, transportation, and electricity sectors.
Reduced economic activity would lead to reduced emissions. Also, with a shrinking economy, government revenues would decrease, and the government debt burden would increase. The results show that becoming a low-carbon economy would not only help mitigate the adverse impacts of climate change but also make the Irish economy more resilient against an external energy price shock.