The potential cost of missing Ireland’s emissions targets could reach a staggering 27 billion euros, according to a new report.
The alarming figure comes under a worst-case projection under which Ireland does not implement any further measures to reduce emissions and the price of purchasing credits from other EU member states.
On the other hand, the Government could reduce this risk and potential costs to between three and 12 billion euros if it follows through on measures from its own plans that have yet to be enacted.
Ireland is bound by targets for renewable energy consumption and reductions in greenhouse gas emissions under multiple EU schemes, which come with significant potential costs for non-compliance.
A joint report by the Fiscal Advisory Council and Climate Change Advisory Council says that Ireland needs to act on the climate targets now to avoid incurring “colossal costs”.
Most countries in the EU are off track to meet reduction targets under the Effort Sharing Regulation (ESR), but Ireland is among the worst-performing countries for exceeding its targets of million tonnes of carbon dioxide equivalent (Mt CO2 eq).
Fiscal Advisory Council chairman Seamus Coffey (Niall Carson/PA)
On a per head of population basis, Ireland is the worst performing country under the ESR targets, which covers non-aviation domestic transport, buildings, small industry, waste and agriculture emissions.
Maire Donnelly, chairwoman of the Climate Change Advisory Council, described Ireland as a “standout laggard” in this regard.
If Ireland fails to comply with its EU requirements, the scale of the potential bill depends on how close it gets to meeting each of its targets and the price of compliance. The price also depends on broader progress across the EU in achieving the same targets.
The report finds that if the Government follows through on its Climate Action Plan, this would reduce potential costs by more than half.
However, the councils warn that the plan is “not being delivered at the scale or the speed required”.
Asked about the large gap between the lowest and highest cost estimates, Fiscal Advisory Council chairman Seamus Coffey said: “The range is very broad – but it doesn’t include zero, it doesn’t include negative numbers.
“A range that broad that doesn’t get over zero suggests what side of the line we’re going to be on.”
Pressed on where he expected the final bill to line, he said there was still a lot of uncertainty but said it could be between 10 and 12 billion euros depending on what action the Government takes.
The report presents the Government with a choice between spending now and reaping the benefits of ramping up efforts, or transferring massive amounts to EU neighbours for Ireland’s non-compliance and falling into deepening emissions targets.
The authors argue that it makes the most sense to spend money now and avoid a “colossal missed opportunity”.
“Recent events have highlighted how climate action can benefit people. Ireland’s reliance on imported fossil fuels left it exposed to geopolitical disruptions and price rises during the cost-of-living crisis.
“More recently, Storm Eowyn showed the need for more secure and stable energy infrastructure.
“Acting now can help reduce these vulnerabilities and avoid large transfers to neighbouring countries. Ultimately, these are funds that could instead be used to improve people’s wellbeing.”
The report states that failure to meet targets has already cost Ireland significant amounts of money. In the past four years, Ireland has lost out on 500 million euros of potential revenue from carbon credits it could have sold but is instead holding on to the bridge the gap to the overall target.
The authors add: “Swifter action would do more than just avoid hefty payments and meet Ireland’s agreed commitments. It would transform Ireland’s society, making it healthier, more sustainable, and more energy secure.”
The prices that will apply under the ESR are highly uncertain and will ultimately depend on the extent to which other EU member states achieve their targets.
The price of “emissions allocations” from countries that have overperformed on their reductions will be agreed by the two states involved. As many countries are due to miss their targets, there will probably be a shortage of allocations to go around, and therefore, market prices are hard to predict.
With a shortage of allocations, some countries could face infringement proceedings, which may be set at the level of the last allocation purchased.
However, Ms Donnelly said “there is hope” and that “a few measures could make a big difference”.
As examples, she said seven billion euros could be spent on upgrading Ireland’s electricity grid, four billion euros could be spent on reducing the price of 700,000 electric cars to below 15,000 euros and ramping up charging infrastructure, one billion euros could be spent on supports for forestry and peatlands
This amounts to 12 billion euros – one-tenth of the capital spending planned out to 2030.