In early November, Dublin was host to the Climate Innovation Summit. Supported by the European Commission, the event gathered policymakers, academics, entrepreneurs and business leaders from Ireland and around the world to discuss how to mobilise the global finance sector to take action on climate change.
The event was also the official launch of Dublin as the base for the European secretariat of the UN Financial Centres for Sustainability (FC4S). Dublin has been given this central role in supporting the expansion of sustainable, green financial services in Europe in order to accelerate the transition to a zero-carbon economy. While such a distinction is a boost to the country’s role in the energy transition, it is also a reminder that more needs to be done to prioritise climate action in Ireland. Ireland will miss EU carbon emission reduction targets for 2020 which will incur hefty fines of several million euros. While it is too late to change the outcome for 2020, this new leadership role puts the spotlight on Ireland and should provide an impetus to achieve 2030 reduction targets.
The urgency of climate action was conveyed by European Commission Vice-President for Energy Union Maroš Šefčovič, who attended the summit. He noted that “current levels of investment are not sufficient to support an environmentally sustainable economic system that fights climate change and resource depletion”. The European Commission estimates that approx. €180bn of additional investment is needed each year to achieve the EU’s 2030 targets agreed in Paris, including reducing greenhouse gas emissions by 40%. Of this, it is estimated that approx. 75% will need to go to energy efficiency projects, 20% to transport, and the remaining to renewable energy projects. Clearly, reducing our energy use is the biggest single step we can take in the energy transition.
This creates a huge opportunity for investment in energy efficiency projects. The Irish Government was represented at the Summit by Minister for Communications, Climate Change, and the Environment, Richard Bruton, who highlighted the stark reality of housing stock in Ireland. Currently, housing in Ireland uses approx. 58% more energy than in the rest of Europe. It is estimated that investment of c. €50bn is needed to improve energy efficiency in Irish housing stock, of which the Minister said the government would be able to fund €5bn. This leads us back to the main focus of the summit: how to meet the substantial investment needs of transitioning to a low carbon economy?
Blended finance is a crucial tool for mobilising resources for sustainable development and is being used to bridge the investment gap for energy efficiency in Irish building stock. Blended finance allows both public and private investors with different risks and return profiles to invest alongside each other while achieving climate action goals. For example, the European Investment Bank (EIB) recently announced a partnership with the Sustainable Energy Authority of Ireland (SEAI) to increase the use of EIB guarantee programmes to encourage Irish banks to lend money for energy efficiency initiatives to both individuals and SMEs. If successful, consumers and businesses will engage with the project and invest to improve the energy performance of their own homes and businesses, reducing ongoing energy bills and recovering the capital invested over time.
The Long Road Ahead
Ireland has a long road ahead to achieve EU 2030 reduction targets. There are many tools available to the Government to make the next 12 years count in this energy transition. Blended finance is being used to attract different forms of capital to the Irish green economy. This year also marks what could be Ireland’s most decisive action so far regarding climate change, the first issuance of green bonds. Ireland became the fourth European nation after France, Poland, and Belgium to enter the green bond market. This will ensure that €3bn is invested to support climate action goals. The offering attracted a diversified range of international investors who gave the Irish Government a vote of confidence in their drive to achieve Ireland’s sustainability goals. In turn, the Government is required to regularly report to investors on how the proceeds of the bond are invested, how projects are selected, and what environmental and social impacts are created through the projects.
The Government also has demand-side policies at its disposal such as procurement, grants and national-level policies, to stimulate the supply of green economy goods and services. An overarching climate change strategy that is effectively articulated to the general public will also help convey the message that taking action is in everyone’s best interests, not just the Government’s. It is an opportunity to innovate, reduce energy poverty (i.e. those with limited access to energy because of its cost), reduce congestion on our roads, and even clean the air that we breathe. The Government has an opportunity to show the international community that Ireland is a go-to green financial centre, and for that, we need to walk the talk.
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