Carbon pricing central to Ireland’s new Climate Action Plan
Ireland is one of the developed economies whose greenhouse gas emissions remain stubbornly above 1990 levels—a group that includes Australia, Canada, the US, South Korea, Japan and New Zealand. But unlike many members of this poorly performing cohort, Ireland is an EU Member State, and within the EU’s increasingly restrictive climate policy framework, there is little room for maneuver. Ireland must turn the tide, and turn it fast, if it is to avoid the opprobrium of its closest allies, not to mention severe financial penalties.
The radical Climate Action Plan published on 17th June must be interpreted within this context.
The Plan also reflects domestic pressure. Irish citizens are more concerned than ever about climate change, perhaps in response to severe weather events that have been striking the country with increased regularity. This changing mood was reflected in thirteen sweeping recommendations made by a Citizens’ Assembly to Government last year, many of which were supported by a cross-party Parliamentary committee in April, 2019.
In response, the new Plan performs radical surgery on how decisions are made. Key departments— agriculture, transport, energy—who have always had a financial budget will now also have a carbon budget for every five-year period. This budget will be set by the Minister, based on advice from a strengthened Climate Action Council of independent experts. Taken together, budgets must be consistent the overall objective of carbon neutrality by 2050.
While some economists oppose sectoral targets on efficiency grounds, negotiations between Government departments had become zero-sum, far too often focused on finding excuses for inaction and pointing the finger elswhere. If implemented, the new arrangement will make departments responsible for finding creative solutions.
Strikingly ambitious targets have been set for renewable power (70% by 2030), retrofit of buildings and uptake of electric vehicles. Technology-specific subsidies will be required to ensure that these targets are met. However, their effectiveness will be enhanced by a carbon tax, which is scheduled to increase from €20/t to €80/t by 2030, reflecting World Bank guidance.
However, last year’s budget saw a proposal to increase the carbon tax shelved at the last-minute. This political reversal provoked a period of reflection—Government departments, think tanks such as IIEA and ESRI, and the Climate Change Advisory Council, considered how a carbon tax could be designed to enhance social and political support. Options that are being explored include recycling revenues directly back to households, and hypothecating some funds for low-carbon investments. We must wait for October’s Budget to see the outcome of these deliberations.
Meanwhile the EU’s emissions trading scheme continues to work away in the background. Ireland’s sole coal power plant has been pushing out of merit in recent months by a high carbon price, well above €20/t. Coal and peat will be entirely phased out of power generation by 2025, at the latest.
Carbon pricing will therefore continue to be a central part of Ireland’s decarbonization story, but it is not the full story. Public spending on green infrastructure will be increased, covering a charging network, energy interconnectors, smart grids, public transport and cycle lanes. Technology-specific supports will spur uptake of specific low carbon technologies such as electric vehicles and heat pumps, but their effectiveness will be enhanced and their cost to the exchequer reduced by a rising carbon price. Enhancing the social acceptability of a rising carbon price, meanwhile, has become a key focus.
Ireland now has a plan equal to the urgency of climate change challenge, but plans do not reduce emissions. For that we need implementation.