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LAST UPDATE | 4 Mar
IRELAND COULD FACE up to €26 billion in extra payments within the EU if it doesn’t act swiftly to avoid missing legally binding climate targets, a new report has warned the government.
The cost of implementing climate action measures now would be cheaper than the cost of failing to take action, the report says.
Improving Ireland’s climate action would significantly reduce the estimated cost range of missing targets from between €7.5 and €26.4 billion down to between €3.4 and €7.5 billion.
Irish Fiscal Advisory Council chair Seamus Coffey described it as a “clear case of being able to reduce a massive fiscal risk”.
“Ireland can take actions now to offset potential costs down the line. It can do so in a way that doesn’t threaten the wider sustainability of the public finances,” Coffey said.
The IFAC and the Climate Change Advisory Council (CCAC), two bodies tasked with advising the government on fiscal and climate issues respectively, have jointly assessed the potential costs Ireland faces if it misses agreed EU targets.
The report identifies three key strategies that would be less than half the price of paying the upper-end costs and would help Ireland to comply with climate obligations.
The first of these is upgrading the national energy grid at a cost of €7 billion.
Secondly, the government should reduce the cost of 700,000 new electric vehicles to under €15,000 and ramp up charging networks for €4 billion.
Thirdly, it should spend €1 billion supporting forestry and the rewetting of peatlands.
With the climate policies, regulations, and incentives that Ireland has already implemented or adopted, Ireland is likely to significantly miss a range of climate targets. The potential upper cost estimate of the resulting payments is €26.4 billion. The lower cost estimate – effectively the ‘best case’ outcome under this scenario – is €7.5 billion.
With additional climate action beyond the measures already in place, the upper cost estimate falls to €11.9 billion and the lower cost estimate falls to €3.4 billion.
That means that Ireland’s financial burden due to missed climate targets would be lower if Ireland takes more significant climate action now, thus avoiding missing the targets as grievously.
As well as helping to avoid expensive penalties, these measures would help to transform Ireland into a ‘healthier, more sustainable and energy-secure society’, the report says, with lower reliance on imported fossil fuels and stronger economic activity and employment in sectors related to the measures.
Ireland, along with other EU member states, is signed up to various pieces of EU legislation and targets on climate action that, if missed, could carry hefty costs.
These include the Renewable Energy Directive, the Land Use, Land Use Change and Forestry Regulation and the Effort Sharing Regulation – all of which, today’s report says, Ireland is “not on track” to comply with.
The most significant risk for Ireland, the report says, is the cost of missing emissions targets covered under the Effort Sharing Regulation, which includes domestic transport, buildings, small industry, waste, and agriculture.
“Ireland is already near the bottom of the league when it comes to emissions reductions covered by this regulation,” the report says.
If Ireland does not meet its emissions-reductions commitments in these sectors, it will need to purchase ‘allocations’ of emissions from other member states that do.
The problem is that purchasing emission allocations could be expensive and difficult because only a few member states are likely to overperform and have allocations left over to sell.
“The shortage of emissions allocations available for purchase could result in a bidding war. This would leave Ireland with limited or no access to the necessary allocations to, in effect, purchase its compliance with the regulation,” the report says.
The wide range of potential costs that Ireland could face due to missed targets is driven by the fact that, if we overshoot our emissions and have to purchase allocations, the cost is dependent on what other member states ultimately decide to charge.
CCAC chair Marie Donnelly has said that although Ireland has made some progress in reducing emissions, the pace of change is not sufficient to meet national and EU climate targets.
“The government must take clear and decisive action now to transition to a climate neutral economy,” Donnelly said.
“It is better to make the investments into Irish households, communities and businesses now rather than paying significant compliance costs in the years ahead.”
Reacting to the report, Friends of the Earth chief executive Oisín Coghlan said the takeaway is that the government can either “invest at home right now to accelerate climate action or it can dally and delay and waste billions of euros of taxpayers’ money buying carbon credits overseas in a few years time”.
“If the Government fails to act decisively the report estimates that the bill facing taxpayers could be as high as this year’s health budget, €26 billion, or 12 children’s hospitals. Does any minister or Government TD think it would make sense to give that money to Spain, Greece or Portugal to buy carbon credits rather than take action now at home?” Coghlan said.
“Imagine the benefits of investing in Ireland instead. Rapid, radical action would include warmer homes with lower energy bills for hundreds of thousands of families, including social and private tenants who are left out in the cold by current retrofitting schemes,” he said.
“It could include much more rural public transport and EV subsidies specifically for rural families and more buses and bike lanes in our cities and towns. It could include solar panels not just on every school but on community and public buildings up and down the country.”
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