It comes as no surprise that a major new report points out that Ireland has fallen well behind on meeting its climate goals. But what is striking is the huge costs which will hit in a few years time if nothing is done about this, possibly running to as much as €26 billion.
The report, undertaken by the Irish Fiscal Advisory Council (IFAC) and the Climate Change Advisory Council, follows earlier calculations by IFAC, which first put this issue in focus. It looks in detail at the international agreements Ireland has signed up to and the cost of not hitting the targets. The main agreement is the EU Effort Sharing Regulation in which member states make commitments about carbon emission reductions in a range of sectors. There are a number of other specific agreements too in areas such as forestry.
If a country misses its targets, a bill falls due from 2030 as it must effectively buy carbon credits from other states who have achieved their goals. While there are uncertainties here – principally on the path of Irish emissions and the price of the credits – the report calculates that the cost to the State could be between €8 billion and €26 billion on current trends. To put this in context, the latter amount is roughly equivalent to the 2025 budget for the Department of Health.
Perhaps the pushback internationally to climate policies will mean these targets will be abandoned, or changed. Or perhaps not. The report points out that the targets are now legally binding and that countries who are doing well, such as Spain and Portugal, will want to cash in. Also, for most other EU countries the impact on their public finances would be significantly less than here.
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This level of risk and potential cost provides a compelling case for accelerating key investments. The report points to three areas – upgrading the electricity infrastructure, accelerating the roll-out of EVs and action on forestry and peatlands. A major investment in all three areas would cost around €12 billion, it says, and could cut the potential costs to Ireland from 2030 in half. Buying credits ahead of time from other countries may also be worth considering.
A Government with a lot on its plate and without a Green Party presence might be inclined to ignore these warnings, or at least delay acting on them. This would be a serious mistake. The extent of the fiscal risk pointed to by the report could undermine confidence in the public finances over the Government’s term, unless action is taken. Also, the exchequer is currently flush with cash and has room for manoeuvre.
This is not all about money, of course, with planning delays also a key issue in efforts to upgrade the electricity network and political challenges in reducing farming emissions.
However, the scale of the potential cost shows that the Government must act and develop a strategy quickly to minimise this very serious risk.
