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Ireland‘s Climate Policy in a European Context

Ireland‘s Climate Policy in a European Context. Richard S.J. Tol Economic and Social Research Institute Vrije, Carnegie Mellon and Hamburg Universities. Global mean warming o C. Year. I Risks to Unique and Threatened Systems II Risks from Extreme Climate Events

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Ireland‘s Climate Policy in a European Context

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  1. Ireland‘s Climate Policy in a European Context Richard S.J. Tol Economic and Social Research Institute Vrije, Carnegie Mellon and Hamburg Universities

  2. Global mean warming oC Year I Risks to Unique and Threatened Systems II Risks from Extreme Climate Events III Distribution of Impacts IV Aggregate Impacts V Risks from Future Large-Scale Discontinuities Source: IPCC 2001

  3. Ireland and Climate Change • Ireland’s greenhouse gas emissions are trivial, and the impact of climate change is minor • Reduce emissions because of international solidarity and responsibility • Current priorities of international climate policy should be the construction of a regulatory regime and the development of carbon-neutral energy technologies • Ireland does not have a rich history in either • Climate policy sometimes seems to be at the expense of energy and environmental policy

  4. Ireland’s 2020 Target • Ireland’s greenhouse gas emission reduction target is the strictest in the Union • The official reason is that Ireland is now the second richest Member State • Commission officials admit to resentment over Ireland’s net contribution to the EU and over Ireland’s past commitment to climate policy • Commission’s plans coincides with the ambitions of the Green Party, while the previous Taoiseach may have had plans for the presidency and the current Taoiseach has enough trouble with the EU

  5. Emission Reduction • Emission reduction in Ireland is expensive, partly because industry is already very energy-efficient

  6. Emission Reduction • Emission reduction is expensive, because industry is already very energy-efficient • Also because of urban sprawl and bad public transport – planning failures of previous times – carbon-neutral cars are decades away • Ireland’s agricultural sector is unusually large, and heavily skewed towards animals – current accounting rules hold the producer rather than the consumer responsible for emissions – there are no easy fixes for methane emissions • So why does the European Commission say that Ireland’s targets are fair, relative cheap and feasible?

  7. € Marginal abatement cost Total abatement cost Target R

  8. € Marginal abatement cost Cost added by new target Previous target Total abatement cost Target R

  9. € Marginal abatement cost Cost reported Shifted baseline Cost added by new target Previous target Total abatement cost Target R

  10. Million tonnes of CO2; multiply by 20 for budget implications

  11. Carbon Tax • The carbon tax (in 2020) needed to meet the 20% target equals • European Commission € 40/tCO2 • EC Impact assessment € 57/tCO2 • Cambridge Econometrics € 169/tCO2 • ESRI >€1000/tCO2 • If the domestic carbon tax tracks the EU permit price* then, according to the European Commission, Ireland will meet its EU target * €20/tCO2 in 2010 rising to €40/tCO2 in 2020

  12. A tax shift from labour to energy would stimulate economic growth

  13. How can the Commission be so far off? Partly incompetence EuroStat gets the wrong data a bit too often Irregularities in DG Research imply that there is one model only: monopolistic complacency Partly structural Climate is environment, but subjects energy, industry and transport: transfer of sovereignty The European Commission is a legislator, the regulator, and the source of information The European Commission

  14. The EU has proposed no less than 28 greenhouse gas emission reduction targets: one for the ETS and one for each Member State for the non-ETS emissions (There are also targets for renewables etc) This is inherently inefficient – the ex ante cost-effective allocation, based on a single model and a single scenario, was overridden by political considerations What to do? Flexibility

  15. Irish proposal: Allow Member States to purchase ETS permits to offset excess non-ETS emissions Polish proposal: Allow Member States to sell excess non-ETS emissions to the ETS Swedish proposal: Allow Member States to trade non-ETS emission allocation Any two of these means full flexibility Three Proposals

  16. The cost of inflexibility

  17. Climate change is a real problem and Ireland should do its bit in solving it – but it should not be a priority in environmental or energy policy Ireland’s initial target for 2020 is too ambitious – but unlike the Kyoto target, this can now be recognised in time and solutions are being worked on Conclusions

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