The Irish wind-power industry claims it has been "nipped in the bud" by last week's Budget, threatening Ireland's ability to achieve renewable energy targets and its commitment under the Kyoto Protocol to curb greenhouse gas emissions.
An Taisce has warned that the Government's decision to defer the introduction of carbon energy taxes for two years, also announced in the Budget, means that Ireland could have to pay penalties of up to €1.25 billion a year for breaching its Kyoto target.
The forestry sector is also reeling from a 22 per cent cut in its allocation in the 2003 Estimates, which it had hoped to see restored in the Budget. As recognised "carbon sinks", new forests were seen as a crucial tool in absorbing carbon dioxide emissions.
The Irish Wind Energy Association (IWEA) has written to the Minister for Finance, Mr McCreevy, to complain about a measure in the Budget that would have the effect of deterring investment in new wind farms by closing a "loophole" to save €10 million a year.
In a move presented as an "anti-avoidance" measure, Mr McCreevy abolished tax reliefs for investors in wind-farm projects, retrospective to the current year, by specifying that only income earned from electricity generation itself would qualify for tax write-offs.
The IWEA asked how this could be reconciled with the Government's stated policy in 1997 that a target of 500 megawatts from renewable energy would be achieved by 2005, saying the Budget change meant that only 15 per cent of the target would be met. It said the wind industry was at the early stages of development in Ireland and needed financial incentives for investing. But now it had been "nipped in the bud at the very time that it is required to deliver renewable energy targets".
An Taisce said last week's Budget was meant to be "D-Day" for the Government's climate change strategy, published two years ago, which specified that a move towards environmental taxation, notably a carbon energy tax, would be be made in 2002.
The strategy promised that "appropriate tax measures, prioritising CO2 emissions, will be introduced from 2002 on a phased, incremental basis across a broad range of sectors in a manner that takes account of national economic, social and environmental objectives."
An Taisce said even these measures had been "casually side-stepped" by Mr McCreevy, despite warnings that pursuing a "business-as-usual" approach would push Ireland's greenhouse gas emissions to 37 per cent above their 1990 levels by 2010.
Given that this would be 24 percentage points higher than the Kyoto cap of 13 per cent, An Taisce said, the Government was now set on a course which would lead to emissions-trading deficits of a minimum of €1.25 billion per annum towards the end of the decade.
Just over a week before the Budget, the Minister for the Environment, Mr Cullen, said the Government must "bite the bullet" on carbon taxes to avoid hundreds of millions of euro in fines from 2010 onwards for breaching Ireland's target under the Kyoto Protocol. Insisting he was firmly committed to bringing forward carbon taxes, the Minister said there was no reason why Irish industry could not switch from coal and oil to cleaner alternatives such as natural gas, a view not shared by the Tánaiste, Ms Harney, or Mr McCreevy.
Last week the European Environment Agency (EEA) said policy measures taken so far by EU countries to curb their emissions of greenhouse gases fell well short of enabling the EU to meet its obligations to reduce emissions overall by an average of 8 per cent.
The latest projections show that existing policies and measures could yield a total EU emissions cut of 4.7 per cent by 2010. The EEA warned that the overall decrease might be as low as 0.6 per cent.
The ESRI is hosting a conference today dealing with the economic effects of introducing carbon taxes to reduce Irish CO2 emissions. Phone 01-6671525 or e-mail admin@esri.ie
