Ireland has set in law the goal of reducing carbon emissions by 51% by 2030 (compared to 2018 levels) and achieving carbon neutrality no later than in 2050. This is aligned with the science which would limit the rise in the global temperature to no more than 2°C while endeavouring to limit this to 1.5°C.
This is a strong and emphatic commitment. However, our current pace of implementation would leave us far from meeting these ambitious targets. According to the Climate Change Performance Index, which ranks 60 countries (responsible for 92% of global emissions) on how successful they are at reducing carbon emissions, Ireland is placed 46th. We are also the third highest emitter per capita in the EU.
The Climate Action Plan (CAP) sets out a framework of policies and actions to be implemented to achieve Ireland’s legally binding climate targets. It sets a carbon budget which reduces carbon emissions by 4.8% annually until 2025 and by 8.6% thereafter until 2030. Despite this, our 2021 emissions are expected to be 4.7% higher than emissions in 2020 (1.1% above pre-Covid restriction levels).
Within the carbon budget, all sectors of the economy have been given emissions reduction targets, starting as low as 25% for the agriculture sector and reaching 75% for electricity suppliers. As the sector with the highest emission reduction target, the CAP sets a goal of increasing energy generated from renewables to 80% (from the current 35%) by 2030. Offshore wind will play a significant role in delivering this target, though significant challenges remain. Although changes have been made to accelerate the planning process for offshore wind projects, the infrastructure needed to build such projects is currently not available. No ports in the Republic can currently support such projects and they will require investment to develop their facilities if we are to meet our targets at the scale and speed that is required. Moreover, investment will also be required to upgrade the grid to cope with the increased capacity from renewable energy.
Part of the CAP that is being implemented exactly as planned is the allocation of carbon tax revenues. A carbon tax reflects the cost to society from the burning of fossil fuels in terms of the impacts of climate change and on human health (one in five people in the world are estimated to die prematurely from fossil fuel pollution). Carbon tax revenues in Ireland are ringfenced to ensure a just energy transition. This includes social welfare to prevent fuel poverty, social housing retrofit and help for farmers to transition to more sustainable methods. At present, agriculture is the highest emitting sector in Ireland, yet it has the lowest emission reduction target, thus reflecting the complexity in this sector when it comes to emissions cuts. The carbon tax aims to help address this complexity.
The carbon tax will increase by €7.50 per tonne every year, ultimately reaching €100 per tonne by 2030. In the latest budget, it was announced the carbon tax will increase to €48.50. However, given the current energy crisis, the government sought to ensure the carbon tax did not result in an increase in the cost of fuel to consumers. The rise was therefore offset by a temporary reduction of the levy on fuel.
In all, Ireland has shown strong leadership by making legal commitments to dramatically reduce carbon emissions by 2030, while continuing to allocate funds for a just energy transition. The scale of the challenge, however, requires strong collaboration between public and private stakeholders to mobilise private investment at the speed and scale needed to meet climate goals. Co-investing or providing guarantees and other assurance to private investors are options to de-risk finance, at a time when rising inflation and interest rates, as well as stretched supply chain, geopolitics, and heightened volatility may distract the world from the urgency of addressing the climate crisis for yet another year.
Carolina Angarita-Cala is Sustainability & Responsible Investing Manager at Cantor Fitzgerald Ireland.
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