Budget measures on climate complicated by unrelated price hikes

The big short-term political risk in relation to Budget 2022 is that an energy crisis already driving soaring gas and electricity prices will worsen over the coming winter, and the range of measures announced on Tuesday will be left looking rather threadbare.

The Budget, as expected, has at least increased the fuel allowance and broadened eligibility which will ease pressures on those most vulnerable to fuel poverty.

Households and businesses, however, are already experiencing the consequences of turmoil on European gas markets with home heating oil, for instance, having doubled in price.

Most will have no buffer capacity as hedging to offset the risk of any adverse price movements is only really possible for big business.

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Hard reality is those soaring energy prices combined with the latest environmentally necessary increase in the carbon tax will make for a difficult few months for the vast majority of consumers.

As a consequence, there is even greater long-term political – and environmental – risk such pain will be conflated with climate action, and quickly diffuse any momentum previously building behind the effort to transform Ireland into a low-carbon economy.

This is in a scenario in which the country has only eight years to halve its carbon emissions, as committed to in the Programme for Government, in an effort to become a climate leader globally. That target that has never been achieved by any state but it is considered essential at a global level to contain temperature rise and ensure a liveable planet.

The green transition requires careful blending of carrot and stick. On the latter, Minister for Finance Paschal Donohoe underlined the role of carbon tax plays; it is likely to be the single most effective climate mechanism for governments.

So the €7.50 per tonne of CO2 rise in carbon tax was locked in from the start. With a realistic price on carbon now being established at European level, rowing back by member states will not be tolerated.

Bold thinking

On the climate-positive side, the Budget has green measures; “do not harm” elements to avoid fuelling further rises in emissions, and even some bold thinking in trying to shift human behaviour in the interests of decarbonising Irish society. Key areas being targeted include public transport, supporting microgeneration for householders, communities and small business as well as maintaining remote working and supporting the use of renewable hydrogen.

Young people between the ages of 19 and 23 are to get a 50 per cent reduction in the cost of using public transport. Such a measure is a proven way to shift over-reliance on the private car that merits extending to all sections of the population, as it would deliver substantial emissions reductions and make cities and major towns less congested while also reducing air pollution.

The Budget includes substantial capital funding for a national retrofitting programme (€202 million), and scaled up funding for the Department of Environment, Climate and Communications which will have a €858 million budget next year.

Some €1.4 billion is to be spent on public transport networks with €360 million for active travel. All this will be required to help progress effective climate action over the coming decade, while €152 million for a just transition will be an important mechanism to secure buy-in.

Budget 2022, however, is just one part of the climate jigsaw, according to Friends of the Earth director Oisín Coghlan.

As with the national development plan, he believes, a lot of questions remain unanswered. There is a need for clarity to be provided in the upcoming carbon budget and revised national climate plan before Ireland goes to the COP26 global summit next month. That includes spelling out how the economy is going to be decarbonised and reinforced by robust emission reduction targets.

Applying emissions ceilings in Ireland's first carbon budget will have major "macro-economic implications", Prof John FitzGerald of the Climate Change Advisory Council (CCAC) has flagged.

The implications will become starkly clear within days, when the CCAC issues its headline recommendations to the Government. That is when the rubber hits the road of climate action.

The level of transformation change involved will necessitate collective buy-in. The risk is than an unrelated energy crisis will undermine that national climate cause at the moment it needs to be scaled up.