Lenny Antonelli http://lennyantonelli.ie/
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The ESRI on Ireland's carbon reduction options

It may be over two weeks since it was published, but I still thought it would be worth attempting to summarise the main points from the ESRI's 'Policy Options to Reduce Ireland's Greenhouse Gas Emissions' report. Ultimately it recommends the inevitable, a carbon tax, which it says will discourage carbon emissions while allowing 'actors' in the economy to respond flexibly based on the most appropriate methods of reducing carbon in their particular sector. It would also provide revenue for the government to offset the negative effects of a rise in fuel prices, enabling it to encourage competitiveness through reductions in labour and income taxes, and to support the vulnerable. What I find most interesting is the acceptance that we need to put a price on the limited capacity of the atmosphere to absorb man-made carbon emissions - if that's the case, don't we also need to put a price on other finite elements of the biosphere that we exploit, such as biodiversity? 

Among its most interesting observations and conclusions are the following:

  • Climate change is a wide-ranging market failure. The pricing of global natural resources - in this case the earth's atmosphere - does not take appropriate account of the services they provide or their scarcity. Actors in the global financial system can make financial gains from activities that disregard the long-term collective interests of the planet. Climate change calls on governments to intervene.
  • Reducing Ireland's emissions to 80 per cent below 1990 levels by 2050 would require an annual cut of 4 per cent.
  • If emissions calculations were altered so that emissions embodied in our exports were included in our total carbon emissions, and those embodied in our exports were omitted, a further 22 million tonnes would be added to our annual figure (based on emissions in 2005).
  • There has been a failure by the government to develop a clear strategy on climate change, and to co-ordinate its approach across departments. A number of potentially effective measures outlined in 2000's National Climate Change Strategy - such as a carbon tax and replacing coal-fired plants with gas-firing - have not come to fruition. Since then, the government has implemented major infrastructure programmes without full consideration of their carbon footprint. For example, a network of motorways has been built, but there has been a lack of investment in public transport and no control of urban sprawl. The economic value of these decisions would have been lower if their carbon emissions had been considered. They are likely to lock transport into its current pattern for decades.
  • Until recently social partnership paid scant attention to climate change and excluded environmental groups. The absence of this subject from the primary forum for policy agenda-setting has relegated it to an issue of secondary importance.
  • One reason a carbon tax has not been higher on the political agenda is Ireland's "idiosyncratic" electoral system, which can make representatives more sensitive to local than national issues.
  • Ireland's carbon reduction strategy should be based on these principles: minimising cost of abatement, an equal emissions price across all sectors, and minimising negative effects on the economy
  • It would be wasteful to have multiple, rigid targets as these can lead to high abatement costs. It would be better to "facilitate flexibility" by ensuring a framework that provides the overall incentive to reduce emissions. Rather than dictate technologies and specific targets by sector, policies that provide the framework to encourage best choices are likely to avoid costly mistakes.
  • A legally binding long term carbon reduction target could provide political certainty to the economy.
  • Though Ireland's total contribution to global emissions is minuscule, we could provide a valuable contribution as a demonstration that smart policies can reduce emissions while also generating social and economic benefits.
  • Implementing cost effective emissions reductions is a sound investment in the future. Failing to do so would see Ireland facing the more expensive task of reducing emissions later, or purchasing more and more emissions permits. The costs of inaction must be considered alongside the costs of action.
  • Businesses that have low energy demand or deal with technologies relevant to a low carbon economy will prosper in future - Ireland could benefit by becoming one of the first movers in this significant area of future economic development.
  • The proposed National Climate Change Commission should be established. It should be appropriately resourced, undertake a continuous review of Ireland's climate performance and available carbon reduction measures, co-ordinate climate policy across government and engage in two-way communication with the public on climate change policy. It should be independent and free from political interference.
  • Money that Ireland spends on reducing emissions abroad as a way of meeting national targets is of no benefit to our economy. Also lost are any secondary benefits, such as reduced air pollution.
  • The government is the state's largest landlord and tenant, maintains a large fleet of vehicles and has control over various public transport providers. More than most private sector bodies, it can base economic decisions on a longer-term timeframe. As long as it provides value for money, the public sector should be stating its emissions, pricing them and adopting the highest energy efficiency standards.
  • While a carbon tax might have minimal initial impact on emissions, it would provide long term certainty that carbon-intensive products, services and processes will cost more, discouraging their use in the longer-term.
  • The bulk of revenue from a carbon tax should be recycled to help the economy - for example by reducing income or labour taxes to aid the economy's competitiveness, with a share set aside to boost the low incomes of vulnerable households and mitigate the effect a rise in fuel prices would have on them.
  • The evidence from other European countries suggests that environmental taxation can encourage economic growth and competitiveness. The introduction of carbon or energy taxes in Denmark, Germany, the Netherlands, Sweden and Finland with revenue recycling had a positive effect on GDP.
  • The sectors most vulnerable to a carbon tax would be basic metals, paper and pulp.
  • "Grandparenting" - the practice of giving emissions trading permits to established industries - disadvantages potentially new industries and clean technologies. Permits allocated for free - as is the case under the EU's emissions trading system - that can then be sold provide what is essentially a subsidy to firms. Allocating permits for free also encourages firms to lobby to obtain as many permits as possible.
  • Cap and Share, an individual carbon trading mechanism - which is explained here and which Construct Ireland discussed here - could be effective, simple to administer and politically acceptable. A criticism, however, is that it fails to "compensate the economy" - a higher carbon price disadvantages the economy , but unlike with a carbon tax there is no revenue to the state to help overcome this disadvantage to competitiveness by, for example, reducing labour costs. 
  • An effective approach to transport emissions could be to charge users directly. Suggested ideas include congestion pricing and road pricing. A national road pricing scheme would charge users per kilometre driven, depending on location and time of day - as is being planned in the Netherlands.
  • The appraisal of infrastructure projects should involve cost-benefit analysis to take into account the 'external' costs and benefits of the projects, including their impact on greenhouse gas emissions.
  • There needs to be a radical overhaul of Ireland's planning regime to discourage car-reliant urban sprawl.
  • A large scale mandatory carbon capture and storage project could be imposed as a condition for the future continued operation of Moneypoint coal-burning power station. Extra coal-fired generation should be contingent on carbon capture and storage.
  • Subsidies for the adoption of new technology do not in themselves encourage reduced use of polluting technologies. They also require a large public expenditure per unit of effect, since recipients who would have innovated anyway receive the subsidy.
  • Carbon emissions reflect our acquired infrastructure and way of life and it was natural to use increasingly more of the planet's ability to absorb carbon, as it was free. Policies must address this absence of price, as this is the root of the problem. This cannot be ducked if we wish to avoid spending large sums of money on policies with disappointing results.
Last modified on Friday, 14 August 2009 15:19