Amid the white noise surrounding last week’s budget, the government made a number of announcements with potentially profound and long-term implications for Irish climate policy. Much as the PD’s allegedly provided the sauce in the meaty Fianna Fail coalition sandwich, it seems that the Greens are now flavor of the day.
The introduction of a carbon tax attracted most comment. A level of €15 per tonne of carbon was chosen. According to Finance Minister, Brian Lenihan: “The yield from the Carbon Tax will be used to boost energy efficiency, to support rural transport and to alleviate fuel poverty. The Carbon Tax will also allow us to maintain or reduce payroll taxes”.
The yield from the carbon levy is expected to be €250 million in 2010 and €330 million in a full year. The differential is explained by the exemption on domestic heating fuels until Spring 2010 (politically wise) and the unfortunate exemption of coal and peat until a commencement order (September 2010 has been mentioned as a likely date for this commencement order).
The exemption of solid fuels follows an extensive lobbying campaign which focused on the potential for loss of revenue from cross-border trade, or the possibility of cross-border smuggling. This is a threat that is likely to have been exaggerated somewhat; solid fuels are the most environmentally damaging per unit of energy, and should therefore be dis-incentivised. The budget does the opposite.
One aspect that has been overlooked in the debate around the design of the carbon tax is the battle royale between Departments Finance and Environment; this was decisively won by the latter. Finance – Departments and Ministers both – are allergic to one thing above all else: the dreaded hypothecation of tax revenue (using it for a specific purpose).
This carbon tax revenue will, however, be hypothecated. A permanent revenue stream has been secured for energy efficiency measures which insures an adequate level of investment for years to come. Given the investment levels required to bring our buildings up to an acceptable level of efficiency, this is a welcome development.
The funding will be channeled into a newly created National Energy Efficiency Retrofit Programme (as proposed by the IIEA) in 2010. Of total funding of €130 million, Minister Ryan will oversee €90 million, €36 million of which will be ring-fenced for retrofitting households experiencing energy poverty. In addition the Department of Environment will launch a €40 million retrofit programme for social housing. This represents more than double the allocation for the same measures in 2009 and a seven-fold increase on the 2008 allocation.
Minister Ryan also announced the incipient introduction of: “…a save-as-you-pay scheme. The up-front cost will be carried by the utility company and the work will be paid off as the person saves”. The manner in which this SAYP programme and grant-aided schemes interact to provide attractive options for homeowners under the umbrella of a National Programme will be vital; this is an issue currently under consideration by government.
According to the Minister the 30,000 houses receiving a retrofit in 2009 HGH will be doubled in 2010, and again the year after with the objective of retrofitting 100,000 houses per annum – this would approach a level of ambition necessary to upgrade the housing stock within a 10-15 year period. It should be noted that the 30,000 figure exaggerates the amount of activity in the market as it includes the majority of homes which only choose one intervention.
The work of the IIEA in this area was acknowledged (of sorts) in the Dail debate on the introduction of the carbon tax.
The remaining revenue will be used to reduce payroll taxes such as PRSI, and household benefits will be increased to offset fuel poverty, as proposed by ESRI in both cases. The tax was not therefore introduced as a revenue raising measure as was widely assumed in the media and other quarters in the run up to the budget.
In another significant development, a very ambitious Heads of Bill for a climate change law was published. This Bill that comparable with NAMA in terms of the scale of its ambition and its potential long-term transformational implications for the economy. It would enshrine a long-term emissions target of -80% on a 1990 baseline by 2050, as well as establishing an independent Climate Change Committee (CCC) within the EPA with many roles, including the provision of advice to government on climate change strategies (five-yearly), and reporting on annual progress.
It contains several excellent ideas, but I will focus on two areas that need attention: it would enshrine in legislation a 3% annual reduction target to 2020; and it does not clarify specifically if the Climate Change Committee’s advice would be published.
In the first case, the proliferation of legally binding targets is becoming confusing and deeply unhelpful. Under the law we would have a long-term target (2050), an EU target for 2020 in the domestic sector, National Climate Change Strategies which would presumably include intermediate (five-yearly) targets, and annual targets on top of all that. Surely the latter is unnecessary.
On the issue of publishing, this is a requirement that is clearly stated for all Commission advice in the UK Bill. It should be noted that the Irish Bill mirrors in many parts its UK forerunner, and credit is due to the UK for providing leadership.
The objective of the law should be to help develop a long-term strategic vision, and the means by which that vision is to be achieved. CCC reports would provide sensitive advice on controversial and unpopular issues such as sectoral targets. If unpublished the advice may be ignored, and we run the risk of climate change policy becoming a zero-sum political negotiation, rather that a strategy based on cutting edge scientific, economic and technological advice. Freedom of Information legislation is not sufficient to ensure the levels of transparency required.
What is clear is that the Green Party are now beginning to add a distinctive flavor to public policy making in this country, and decisions which are being taken now have long term implications for the country.