John FitzGerald: Sustainable electricity the key to lower emissions

The European Union's goal is that, by 2050, its level of emissions of greenhouse gases will no longer impact negatively on the environment. This is an objective that Ireland as an EU member shares.

To achieve this, both the EU and national governments have developed a set of targets for 2020 and 2030 for emissions reductions. Unfortunately, it is now clear that Ireland will miss its 2020 target not only by a wide margin, but one that is larger than expected because of the economic recovery.

The fact that Ireland has not yet moved to a sustainable growth path represents a failure of policy at both national and EU level. The Government has responsibility to improve the environmental footprint of sectors like households, transport and agriculture. However, the EU plays the major role as regards appropriate policy for electricity and large emissions-generating industries such as cement.

While the EU early on adopted policy measures to reduce emissions in electricity generation, the results have shown these policies to date have been very ineffective.

John FitzGerald: North remains land of lost opportunities

---

John FitzGerald: Timing key as Ireland adjusts to globalisation

---

John FitzGerald: Budget 2018 contains missed opportunities

---

Budget windfall from Central Bank profits drying up

---

One key EU measure was “cap and trade”. This put a cap on emissions of greenhouse gases by the electricity and heavy industry sectors. Companies that were emitting more than their cap had to buy permits for additional emissions from other companies that remained below their cap.

The scheme has been a failure. The caps were set too high, particularly given the slump post-2008. This meant low demand for emission trading permits, plenty of supply of surplus emissions credits, resulting in a very low price. So there have been very limited financial penalties faced by electricity companies who generate excessive greenhouse gases.

The outcome has been that Europe’s electricity sector has underperformed on reducing emissions. From an environmental perspective, this is a real policy failure, as lowering emissions from electricity generation can be done for less cost than equivalent emission reductions in many other sectors.

Money talks

The obvious way for the EU to incentivise electricity and heavy industry to move to more environmentally sustainable production would be to substantially raise the price of emissions. Money talks, and strong financial penalties for excess carbon affect behaviour. That is why last year, Ireland's Climate Change Advisory Council recommended that our Government support a French proposal to introduce a minimum price for emissions in the electricity sector.

However, to date, the proposal to have a minimum price has lacked widespread support in the EU. Poland, in particular, will not accept it because of that country’s heavy dependence on coal. Germany, which has built a number of new coal-fired electricity plants since 2000, is also unwilling to back such a proposal, in spite of its public rhetoric supporting action on climate change.

Sustainable electricity production is a vital ingredient of sustainability policies in other sectors, which makes the failure of an effective EU-wide policy in this area all the more damaging.

To reduce dependence on fossil fuels in transport, many EU countries are working to achieve a switch to electric cars over the medium term, and Ireland will likely follow suit. The switch to electric heating is also being promoted.

However, unless the electricity used for cars and heating is also produced in a sustainable manner, countries could find themselves locked into continuing significant greenhouse gas emissions after 2030.

Recognising the problems with the EU Emissions Trading System, the UK government in 2013 unilaterally introduced a minimum carbon price for fossil fuel used in generating electricity. This price kicks in if the EU Emissions Trading System price is too low. The new Netherlands government last week also promised a similar measure. The Portuguese government has announced it is raising the cost of coal-fired electricity generation. Thus a range of governments are adopting their own measures to drive decarbonisation of their electricity systems.

While co-ordinated EU action would be much better, in its absence it may well be necessary for individual countries to take action, even though they may risk a loss of competitiveness in so doing. However, unilateral actions may not succeed in reducing the totality of EU emissions – lower emissions from the Netherlands may simply permit more for everybody else.

Interestingly, the new Netherlands government programme indicates that if EU action is not forthcoming, it will strive to develop a more ambitious north-western European response to tackling climate change. Ireland should consider joining this coalition.

It could also appeal to a UK outside the EU, as well as to countries such as Portugal, France and Denmark. It might even embarrass the German government into participating.