Government is warned of high cost of not achieving Climate Action Plan

The State will face mounting costs on top of tens of millions in fines and purchases in carbon credits if the Government’s new Climate Action Plan falls flat, the State’s spending watchdog has warned.

Ireland’s under-performance on climate action and renewable energy is already projected to cost the State up to €125 million in fines and purchases of carbon credits, the comptroller and auditor general (C&AG) found in its annual report on public spending. This is in addition to € 121 million spent on purchasing carbon credits already.

However, the watchdog also warns that "in the event that the planned policies and measures contained in the Climate Action Plan are insufficient to meet Ireland's annual targets...Ireland may need to purchase additional credits during the 2021-2030 period".

The report also warns that there is “no guarantee” that low prices for carbon emissions, which have helped Ireland control the cost of its underperformance so far, will continue.

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It outlines the cost to date of Ireland’s performance on climate change. The majority of the cost will be driven by fines levied for Ireland’s failure to hit targets on renewable energy installation.

While the State has committed itself to providing 16 per cent of gross final energy consumption from renewable sources by 2020, it is currently expected to miss that target by around 3 per cent.

The C&AG report states that “indications based on trades between other member states suggest that the shortfall could result in costs of the order of €110 million, subject to prevailing market conditions”.

Emissions targets

Ireland is also set to miss its energy efficiency target, and while there are no binding penalties for this failure the C&AG warns “underperformance in this area may impact Ireland’s ability to meet the binding renewable energy and emissions targets”.

Ireland will also have to pay a further sum, estimated to be between €2 million and € 14 million, purchasing carbon credits to make up for a shortfall between our binding target on emission reductions and what is expected to be achieved.

Under 2020 targets Ireland is mandated to be 20 per cent below emission level for sectors not covered by the emissions trading scheme, which includes sectors such as agriculture. However, the latest projections are that Ireland will only be between 5 per cent and 6 per cent below 2005 levels.

Ireland has previously been criticised over a lack of transparency relating to how it spends income gained from the auction of “allowances”, the units which are used for emissions trading. Under European rules at least 50 per cent of the revenue generated from sale of allowances must be used to finance climate and energy programmes.

Ireland does not formally ring-fence the funds, arguing instead that amounts equivalent to 100 per cent of such revenue are used to reduce emissions annually. However, the European Commission has noted that Ireland is one of just 10 member states not to formally ring-fence the income.

Transactions

Ireland was also deemed to provide a “low level of detail on the application of revenue to projects aimed at reducing emissions”.

The report also found that Ireland is struggling to accurately capture the scale of greenhouse gas-related transactions as they are spread across a wide range of State organisations. This means that the full impact on the exchequer is “not readily visible”.

The C&AG said a planned “green budgeting framework”, announced in Budget 2019, has the potential to bring greater transparency to the impact of climate change policies on public finances.