My fellow Climate Change Advisory Council member, Ms Laura Burke, and I would like to thank the committee for this invitation to discuss how the challenges on climate change faced by Ireland and the rest of the world can best be tackled.
Climate change is here, it is caused by humans, and it is affecting us all. The increased frequency of extreme weather events, flooding and drought are manifestations of what will be a growing trend, unfortunately, until the world halts the momentum of climate change. Without urgent action, we are facing a global climate disaster.
Ireland has a moral imperative to play its part in helping to address the problem of climate change. As a result, we have set ourselves a binding target to decarbonise Irish society by 2050, with key milestones along the way. Failure to reach these milestones will have multiple adverse consequences. The task of the CCAC is to provide independent advice on policy. The council considers that it is critical to assess how Ireland can best meet this challenge at least cost and to identify other benefits, such as improved air quality or health outcomes, to which I will return.
Unfortunately the very limited policy actions so far means that we are going backwards. Emissions are rising not falling. Improved economic performance will make this even worse because greenhouse gas emissions remain strongly coupled to economic growth. We have, therefore, a really big problem.
The council believes that Ireland needs a suite of new policy initiatives to make a real difference. There is potential for progress in particular through the national planning framework and the national development plan, but also the national mitigation plan and the upcoming national climate and energy plan. We need to move these plans forward into concrete action and implementation with monitoring and evaluation of the effectiveness of delivery. We have commented on this in terms of the national mitigation plan in that it needs concrete actions to put it into effect.
This is a task not just for the Government, but also for the Oireachtas. Without broad-based support in the Oireachtas for serious new measures Ireland will continue to move ever further from its targets.
We know from a very wide range of research in Ireland and elsewhere that changing incentives can help us to change our behaviour. That is why one of the key messages from the council, identified in our first report in 2017 and repeated in all subsequent reports, is that we need to reflect the potential damage done by emitting greenhouse gases in the price of those emissions. Without a full reflection of the cost of emitting greenhouse gases it will not be possible to effect or deal with the problem of climate change. The wide range of other measures and policies that are needed - a whole suite of additional policies is needed - to bring about decarbonisation will be undermined if emitting greenhouse gases remains the cheap option. It must no longer be the cheap option if we are to go anywhere.
The carbon tax in Ireland, and the carbon price in the EU emissions trading system, are too low and do not reflect the costs of climate change. This is a key factor in our failure so far to make progress on tackling the problem.
There are three key reasons pricing emissions of carbon dioxide and other greenhouse gases is important: it discourages use of fossil fuels and encourages us to switch to alternatives such as renewables thus making it comparatively cheaper and more attractive to use electric cars, upgrade our homes and buy A-rated appliances and, equally, pricing emissions appropriately means that business and Government would also find that eliminating greenhouse gas emissions saves money, for example, by purchasing and operating high emissions buses needs to be much more expensive than zero emissions buses; second, carbon pricing, and especially the carbon tax, provides the Government with revenue which it can use to compensate or support those who are on low incomes who would be affected by the rise in the price and can be used in the budget to reduce other taxes or increase expenditure - an issue that came up last week - as research shows that shifting from taxes on labour to taxes on carbon can actually increase employment - it is possible to take action on climate change which actually improves things in terms of the economy rather than making things worse as well as playing a crucial role in reducing emissions of greenhouse gases; and, finally, the most important effect of appropriately pricing emissions is to incentivise business to invest in new technologies, which will allow us to continue to enjoy a high standard of living while eliminating emissions of greenhouse gases.
The prospect of a higher price for carbon is already driving essential innovation, for example, in electrification of transport. The motor industry worldwide would not be investing, or have invested as it has, in new technologies without the prospect of the high price of carbon. Similarly, we also need to drive investment in finding ways of producing low-carbon heating for homes.
The current carbon pricing levels are too low to see these effects reach their potential. The carbon tax should be increased to at least €30 a tonne in the next budget, with a commitment to raise it in subsequent budgets. That is why one Oireachtas cannot commit a future Oireachtas to action but getting broad support from this committee, that raising the tax in this budget will continue into future budgets is important because it will tell people that if we invest in reducing emissions, it will be even more profitable in the future than it is today. Low levels of carbon pricing do not deliver sufficient results. A significant carbon price would not only deliver immediate emissions reductions, but would also put the conditions in place for a longer-term ambitious low carbon transition through improved investment choices.
We face major challenges across a range of areas of the economy - energy, heat, transport, agriculture and industrial emissions.
I want to pick on one example. In the case of heat, we need to upgrade most of our 1.5 million households. Actually, we have 2 million houses. If this is to happen, it needs to be the cheap option and must reflect the appropriate price of polluting. However, that is only the beginning. If Mrs. Murphy, a pensioner living in County Mayo, is to retrofit her house, improve insulation and change to renewable heating, in the first instance we must be able to tell her it will save her money. That is only the beginning, however, because she might not be able to fund such an investment. Even if she can, the need to manage a major building project will probably be a bigger obstacle. She might be concerned that the builders will do a bad job or that they might tip off potential burglars. For these reasons, we need to build a suite of supporting policies to ensure Mrs. Murphy can and will upgrade her house. There would be no point in her going through all this effort if it does not save her money and does not save the planet. If a suitable range of policies is developed so that Mrs. Murphy retrofits her house, this will save her a significant amount of her limited income over the rest of her life. There are substantial potential benefits. She will be much more comfortable. She may well experience enhanced health and life expectancy as a result of these improvements. She will have made her contribution to tackling climate change.
Extensive ESRI research shows that poorer households spend larger portions of their budgets on heating than richer households. While poorer households need to be part of these reforms, they must be protected from the consequences of such reforms for their budgets precisely because they spend significant amounts of their money on energy for heating. Successive studies indicate that this is best dealt with by means of an appropriate increase in social welfare to ensure poorer households are fully compensated. As long ago as 1992, an ESRI study conducted by my then colleague, Sue Scott, indicated that approximately 30% of the revenue from a carbon tax would need to be allocated for this purpose. Support can also be directed to help low-income households to retrofit their houses, thereby reducing the portions of their incomes required for home heating. The Sustainable Energy Authority of Ireland, SEAI, has introduced programmes in this regard and this needs to be expanded. The authority is doing good work to assess what works and what does not. There is no single answer. We need to assess various projects. Some projects do not work when they are tried, whereas others are successful.
The State is the largest landlord in the State, with approximately 150,000 tenants in social housing. Like all landlords, the State has a duty to upgrade its housing stock to move to a carbon-neutral world. If it does not do this, how can the other 1.35 million households be expected to do so? Reports suggest that the cost of upgrading a dwelling is between €30,000 and €50,000. If that is the case, the State will need to spend approximately €5 billion on upgrading its housing stock. It is a lot of money. As I said when I spoke about Mrs Murphy, this investment will leave tenants better off, more comfortable and healthier, while also implementing the State’s commitment to decarbonise the economy. I appreciate that €5 billion is a very large sum, especially in the context of the need to build more social housing. It would probably buy 15,000 social houses. The State will need all the help it can get from carbon taxes to fund this transformation.
I have concentrated on how appropriate pricing of carbon is essential if we are to tackle the problem of global warming in the heat sector. The same is true for the other sectors that we need to tackle. We are happy to discuss them in more detail. While it is crucial to get the price of carbon right, as I have illustrated, various other policies are essential if we are to do our job of helping to save the planet. As I have indicated, some of these policies might save us money, as investment in renewable electricity has done. Up to 2012, we had to pay more through the public service obligation for electricity, but the effect of renewables was to reduce the price of electricity. There was a win-win. We were emitting substantially less carbon and the households and companies of Ireland were paying less for their electricity. We need to target such measures.
Our first job is to pick the easy wins where we can save money while improving our living standards in other ways. Some easy wins that save money and also cut carbon emissions, such as the closure of peat-fired generation, might have adverse effects on employees and local communities. Supporting individuals and communities that are adversely affected and helping them to make the transition to low-carbon economic opportunities will help to speed the adjustment. Approximately 3 million of the 60 million tonnes of carbon dioxide we are emitting comes from peat-fired electricity. It is costing everybody money. There is an easy win in this area, as long as we deal with the fallout for those who are directly affected. There will be a need for very significant investment by the State, companies and households. This will pose problems in the context of the continuing strain on Government resources.
Identifying and maximising co-benefits in terms of health, air quality and a range of other benefits from climate policy is important if we are to move forward. In prioritising this work the council has emphasised that Ireland must implement a major increase in the cost of emitting carbon in the coming decade, moving to a substantial carbon tax by 2030 of approximately €80 a tonne or higher. Because of doubts about the success of the reform of the EU emissions trading scheme, ETS, the council has also recommended that Ireland implement a carbon price floor for electricity, something which has already been implemented in Great Britain which is the leader in this regard. It could be done, for example, by joining with a coalition of willing partners such as France which is very keen on the idea, the United Kingdom and the Netherlands, the new government of which announced in November that it would go down this route. That would guarantee that if Ireland were to invest in renewable electricity, it would make money in the future, whereas the current uncertainty about the ETS price makes such investment a risky option.
In the coming year the council will focus successively on the detailed policy measures needed in the areas of agriculture, heat and transport. Although we have not reached detailed conclusions, we are still happy to discuss these areas with the committee.
Research shows that how we communicate the need for action on climate change is of importance. The Citizens’ Assembly has shown the potential of citizen engagement and it is hoped the national dialogue on climate action will expand its effects throughout the country. These will be important to maintain public support for the changes required in the coming years, especially those which involve expenditure. Policy must take account of the complex factors that affect human behaviour. I refer to the example I gave of the obstacles for Ms Murphy in upgrading her dwelling. We must choose policies which will help us to make the right choices for the future.
Carbon pricing alone will not deliver the necessary emissions reductions, but delivering emissions reductions without a sufficient carbon price will be almost impossible and certainly far more expensive. Increasing the cost of emitting carbon is not a once-off commitment, rather it must be sustained in the coming decade. If we are to decarbonise the economy and our society, it is essential that there be wide support across all political parties for this essential step on the decarbonisation journey. That is why the work of this committee is so important.