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Irish businesses face torrent of change as climate crisis bites

From agriculture to energy, ambitious new targets will have far-reaching consequences

The report this week by the United Nations Intergovernmental Panel on Climate Change (IPCC) scared more people than any Stephen King novel, not least because it is not a work of fiction. The terrible reality of the threat to the ecological stability of the planet needs no sexing up.

The supranational group of 200 top climate scientists laid out empirically that climate change is real, advanced and “unequivocally” caused by people. It warned that ever-rising global temperatures due to emissions of carbon and other damaging gases are causing a deadly array of natural disasters.

For many, the IPCC report resonated neatly with the ongoing steady flow of news stories about wildfires, floods and killer temperatures around the globe. Environmental activists and politicians alike say it is now inevitable that major change at every level of society must be wrought to counter the worst of the threat. This will affect the everyday interactions of people but also businesses.

"It will affect every sector of the economy. The scale of the challenge means there is no opting out," Minister for the Environment Eamon Ryan told The Irish Times this week from his summer break off Ireland's coast.

The State appears to be rounding an inflection point in its response to the climate threat that is likely to send a torrent of change rushing into many boardrooms and executive suites across the State.

Last month, Ryan and his Government colleagues passed far-reaching legislation based on the Paris Agreement commitment for net zero emissions by 2050, with legal force given to an ambitious 51 per cent reduction frontloaded to 2030. Next month, the Government, helped by independent advisory body the Climate Change Advisory Council, hopes to approve a new Climate Action Plan setting out what must be done. The council will also help to draft a "carbon budget" for the State.

The new laws look set to bring new realities. Wherever business decisions are made, many of them are likely to be influenced by what is coming down the tracks. Emissions-intensive sectors such as transport, agriculture, construction and energy will be at the front line.

As the Government prepares to adopt a new plan, what sort of changes are businesses in some of the biggest carbon-emitting industries facing?

Beginning this autumn, carbon emissions will be rationed and budgeted across the State much like public spending, with the CCAC’s help. Each specific sector will have emissions caps and targets for reduction, with the relevant ministers answerable to their Dáil colleagues for their progress.

“All the chips are down on the new green economy. We hope to have the new plan some time in September, although the CCAC has to do its work first,” says Ryan. “The last plan in 2019 was a good plan. We will use the same structures, but we will also radically increase the ambition.”

Yet radical change for the economy and for businesses is also bound to create friction. There is already spirited debate in sectors such as aviation and agriculture that will bear the brunt of the change. For example, in aviation, Ryanair's Michael O'Leary has expressed deep concern over how proposed new taxes on aviation fuel are being formulated at European Union level.

In agriculture, farmers have concerns over the wholesale extent of change being planned for the sector, and the impact it may have on their incomes and on rural life. As the Government and its advisers prepare to adopt a new, upgraded action plan, what sort of changes are businesses in some of the biggest carbon-emitting industries facing?

Agriculture

Farming is responsible for about one-third of all Irish emissions of greenhouse gases, which include carbon and, of particular relevance to agriculture, methane and nitrous oxide. The Republic is one of the biggest per capita emitters of methane globally due to the outsized scale of the national herd of cattle.

“When I first took over as chair of the CCAC [in 2016], I thought I’d have to tell farmers to slaughter a load of cattle,” said well-known economist and Irish Times columnist, John FitzGerald, who remains a member of CCAC but no longer chairs it.

“But actually there is a sweet spot the sector should be aiming for. We could reach a point by the mid-2030s onwards where agriculture is actually sucking carbon out of the atmosphere, rather than making things worse. It will depend a lot on the arrival of new technologies, but it is doable.”

As one measure, he envisages that cows could, in future, be partially fed on a diet of seaweed to help reduce their expression of methane. He still believes, however, that there will need to be some reduction in the national herd to fight climate change, but “farmers make nothing out of beef anyway”.

If there are fewer animals roaming the land, then how should those fields be used instead?

FitzGerald says more agricultural land will be used to produce timber to replace more carbon-emitting building materials such as cement. If planted and tended properly, this is how the land could be turned into a valuable carbon sink to suck up damaging gases instead of farming belching them out.

“If the land could suck up 100 million tonnes of carbon and that was priced at, say, €265 per tonne, that is a national resource worth up to €26.5 billion for an emissions trading scheme.”

Ryan says the State’s current agriculture industry is “not sustainable” but the change required presents an opportunity. He acknowledges farmers will have to be paid to turn their land into carbon sinks.

“But at the moment, the way we use our land means it is a source of emissions, not a sink. There needs to be significant investment in forestry, but it has to be of a type sustainable for the long-term and not the clearfelling [where trees are chopped down for logging] type that you currently see a lot of.”

Transport

This is the fastest-growing source of Irish emissions, responsible for about 40 per cent of energy-related carbon output. It is joined at the hip to the economy: the better off we are, the more we travel about the place.

Ryan says the car industry is the segment of the transport sector that is facing the most change over the next decade, as the State shepherds motorists towards electric vehicles and phases out diesel engines.

“Aviation will take longer, but yes, the sector is also facing huge change,” says Ryan.

FitzGerald predicts it will be the “last user of carbon by 2050”, the critical target year for emissions reductions as set out in the Paris Agreement between more than 190 countries to fight climate change.

The European Union last month laid out a package of climate change proposals that could see aviation fuel, from 2023, levied for the first time with taxes that will be gradually increased over the course of the following decade. The sector is also covered by the EU’s emissions trading scheme, which controls the emissions allocated to large companies, and charges them to emit more.

Much to the chagrin of aviation executives such as O'Leary, however, long-haul flights will be exempt from many of the rules, which will apply mostly only to short-haul flights within the bloc. This puts airlines such as Ryanair at a disadvantage to their flag carrier rivals.

Ryan says the focus in the aviation sector needs to shift towards developing and using less environmentally damaging fuels than pure kerosene. He also says society needs to start “putting a price” on the climate impact of modes of transport, although aviation industry executives repeatedly point out that flying is responsible for only 2-3 per cent of global emissions.

So is its threat to the planet overblown by its critics, then?

“No, because the sector’s proportion of emissions is growing all the time,” says FitzGerald. “By the 2040s, aviation’s share could be more than 30 per cent.”

He says it is likely that the EU will bring in a regime to tax aviation fuel heavily to make people fly less. “More expensive flying is going to be an issue.”

This will economically hurt an island such as Ireland more than continental European countries, which have rail links as an alternative. But FitzGerald believes the hurt will be small relative to the size of the economy.

“The hit to aviation will not be as bad as the trouble in the sector over the last year caused by the pandemic. But, maybe, with extra taxes and so on we might see the relative cost of travel go back up to where it was in the year 2000, or something like that.”

Ryan hopes that a switch to less damaging fuels will do much of the sector’s heavy lifting in reducing emissions: “It won’t work if we just tell people ‘thou shalt not fly’.

Construction

Cement, the most important building material, is also the dirtiest. The biggest impact the new regime will have in and around the building sector will be how cement is manufactured and to what extent alternative, less damaging building materials such as timber can be used instead.

“Cement faces a big challenge across the world,” says FitzGerald. “The only way to drive down emissions in the sector is through carbon capture and storage. To get around this, we could always stop production of cement in Ireland and import it from the UK (to avoid having to account for its carbon capture in Ireland), but that would just be cheating.”

The EU has proposed a cement border tax, which FitzGerald says will drive the industry towards more timber-frame manufacturing.

Although the shift is already under way, the Construction Industry Federation's director of communications, Shane Dempsey, warns that price increases due to material shortages and delays are a threat.

“A recent report by home builders detailing material inflation found that an average three-bed semi (95sq m) home could see product inflation range between €12,000-€15,000 by end of 2021,” he says. “Timber frame units, being the critical component, account for almost 60 per cent of this increase. Of increasing concern, our members are being told supply cannot be guaranteed and further increases are likely later this year on all timber products.”

The CIF has called on the Government to overhaul the licensing regime for forestry to help address the shortage and cut the reliance on timber imports.

Energy

The level of emissions due to the production of electricity creates a climate impact that flows downstream in tributaries into every other sector. For example, if electricity is produced more cleanly, electric modes of transport will become even less damaging, and so on.

In recent years the State set a target of 70 per cent of its electricity requirements produced using renewable methods such as wind power by 2030. FitzGerald believes this is “doable without a huge cost to society – it is probably not going to impact all that much on the bills of consumers and businesses”.

He believes a major opportunity exists to harness Irish offshore wind power for export to other European countries.

“We would need some of that electricity for ourselves, but we wouldn’t be able to use it all. So we could pipe that electricity to France.”

FitzGerald says there might be enough private capital to finance Irish wind energy development, but the State and private investors should combine to maximise the opportunity.

“The wires should be owned by a public utility. But it is still risky [for the State to invest heavily in offshore wind for export]. The total cost could be €20 billion – too big for the State. France, Ireland and the EU should put up some of the equity. But there would have to be some risk sharing with the private sector, so there will be a lot of opportunities for businesses there.”

Economic degrowth?

One idea that the FitzGerald dismisses out of hand is the notion that the Government should deliberately limit economic growth in order to keep a lid on carbon emissions – the strategy, known as economic degrowth, is favoured by an increasingly vocal fringe of the environmentalist movement.

“Last year was an experiment in degrowth and it didn’t work. Large parts of the economy were shut down for months on end, movement was restricted, and it still only limited emissions by 5 or 6 per cent,” he says.

“Degrowth is not the answer. Asking people to live in the 19th century won’t be popular, and the rest of the world would laugh at you if you tried it.”

The only alternative, he argues, is to remake economic production in many sectors to drive down emissions more sustainably. This means that for businesses in the sectors on the front line, much change is on the way.