Joint Committee on Environment and Climate Action debate -
Tuesday, 24 Oct 2023

Citizens Assembly Report on Biodiversity Loss: Discussion (Resumed)

An Cathaoirleach

The purpose of this meeting is to discuss the recommendations contained in the report of the Citizens' Assembly on Biodiversity Loss relating to the funding and economics of nature restoration. The meeting will be split into two sessions. The first is with Professor Martha O'Hagan-Luff of Trinity College Dublin, Dr. Emer Ní Dhúill of Natural Capital Ireland and Dr. Tadhg O'Mahony of Dublin City University. The second session is with officials from the Department of Finance. On behalf of the committee, I welcome Professor Martha O'Hagan-Luff, Dr. Emer Ní Dhúill and Dr. Tadhg O'Mahony.

Before we begin, I will read out a note on privilege. I remind witnesses of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. If their statements are potentially defamatory in respect of an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative they comply with any such direction. We do not have any witnesses joining us from outside the Leinster House campus.

Members of the committee are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. I remind members that they are only allowed to participate in this meeting if they are physically located on the Leinster House campus. In this regard I ask all members who are joining online or remotely from their offices, prior to making their contribution, to confirm they are on the grounds of the Leinster House campus.

I call Professor O'Hagan-Luff to make her opening statement.

Dr. Martha O'Hagan-Luff

I thank the committee for the invitation to present today. I am an associate professor of finance in Trinity business school and I formerly worked in banking in London and Dublin.

Our green island is no longer green. Ireland has the fewest woodlands of any country in Europe, 50% of our rivers are polluted and our insect populations are in steep decline, which may ultimately threaten our food supply. We must act soon. In this context, I welcome the announcement of the infrastructure, climate and nature fund in the recent budget. We need to value and invest in the protection and restoration of nature if we want future generations to breathe clean air and drink clean water. Nature provides us with multiple benefits, or ecosystem services, which we need to assess and value. We invest in and produce detailed accounts of our produced capital, such as our roads and buildings, and our human capital, including our health, knowledge and skills. However, we have long underinvested in and undervalued our natural capital.

We urgently need to value our stock of natural resources, the condition that they are in and the ecosystem services that they provide. For example, a native woodland filters our water, cleans our air, enhances our soil quality, sequesters carbon, provides habitat for biodiversity, has amenity value and can supply timber. However, only one of these ecosystem services has a marketable value – the timber supply – even though the others are crucial for our well-being and livelihoods. We need to restore and protect our woodlands, waterways, peatlands, grasslands, hedgerows and marine areas. To do so, we need to incentivise and reward the custodians of our land, our farmers and landowners, to provide these benefits, and to pay for the ecosystem services in every year in which they accrue.

There is a public benefit from the water filtration provided by trees, the carbon sequestered by peatlands and the biodiversity supported by hedgerows and strong support must be provided to encourage the provision of these benefits. We have an opportunity to make a difference for the well-being of every citizen in this country, to provide a fair income for farmers, to restore our natural environment and to invest in nature-based solutions to address the dual crises of climate change and biodiversity loss. We can make our island green once more.

There are many excellent recommendations in the report produced by the Citizens' Assembly on Biodiversity Loss but I will focus on recommendations relating to finance. The European Commission estimates that every €1 invested in nature restoration will add between €8 and €38 in economic value.

My first three points relate to sourcing funding. First is public sector funding, or investment by government. The majority of our land, almost 70%, is privately owned. We need to offer strong financial incentives for farmers and landowners, through results-based payments, for the provision of ecosystem services. Current targets in schemes such as the agri-climate rural environment scheme, ACRES, need to be more targeted and ambitious, with increased funding to support this ambition.

We also need private sector funding. A regulated market for biodiversity or nature-positive credits would allow both businesses and investors to buy credits that pay landowners for ecosystem services provided by their land. The purchase of such credits can be viewed as an investment in nature’s recovery, rather than as an offset for damage caused.

Finally, there is investment by citizens. A citizens' green bond issued by the Government would allow individuals to provide funding for nature restoration and climate-related projects. This bond would have the dual purpose of an educational element about projects being undertaken, as well a sense of contributing to the funding of nature restoration.

My next three points relate to additional areas in need of funding. We need to support businesses. Businesses need support to evolve their business models. They need to fully understand how they contribute to biodiversity loss, how they depend on nature, how biodiversity loss is a risk to their business and how these risks should be managed.

We also need investment in research. A research strategy involving State agencies, higher education institutes and other bodies should be created to fund interdisciplinary research on biodiversity and nature restoration. The findings should be widely disseminated to farmers, businesses, Government agencies and the public.

We also need investment in public land. Government-owned lands such as national parks, land owned by local councils and urban areas need further investment to be managed in nature-positive ways. These actions can influence and educate the public, as well as supporting research and having environmental benefits across the wider Irish landscape.

To close, we need expertise to create national accounts of our natural resources and the condition they are in. These data can be used by the Central Statistics Office, CSO, and provided to all. The ecosystem services we rely on cannot be delivered by degraded natural resources.

Dr. Tadhg O'Mahony

I thank the Chair and the members of the committee for the invitation to contribute to its consideraon of the report of the Citizens’ Assembly on Biodiversity Loss. The report is both a clarion call of crisis and an inspirational framework for action. Central to this story is the economics of the status quo but more fundamentally than this, it is a story of people. What is the future of people who live and work on land and water, by the coast and on the sea? What is the future of the people in rural Ireland?

The status quo is driving the biodiversity crisis, declines in water quality and increased greenhouse gas emissions to name but a few factors. At the same time, as acknowledged by the Irish Farmers Association, IFA, member who spoke to the citizen’s assembly, most farms in Ireland are not financially viable. The status quo does not benefit most farmers and often puts them at increased financial risk. We are upholding this status quo by considerable public subsidy. The status quo, built on maximising production, cheap food policy and driving export demand for dairy and meat, is not working for rural Ireland or for biodiversity.

My background is in considering shifts in where we are going and in the economics of possibility.

I spent eight years developing a globally pioneering approach to bring together sustainability and well-being, in other words, to put human well-being and nature at the very centre of what we do. Not only is it clear that these goals can be aligned, a key thing that I have learned on this journey is the importance of reflecting on how we frame our analysis and policy, what and who is prioritised within, and to whom is this beneficial. Instead of the status quo, what would it look like if we put rural people, rural livelihoods and nature together at the centre of what we do? Instead of taking the approach that squeezes farmers and squeezes nature, what would a vibrant, prosperous and sustainable rural Ireland look like?

The international literature is very clear that in an economics of change, there are substantial opportunities for livelihoods. However, in Ireland, we do not yet have the analysis that allows us to fully understand these opportunities and all of the benefits these could provide across the wide range of public policy priorities. Economic analysis often considers the current path and not the alternatives, the economic costs and not the benefits, whether economic or beyond. In an economics of change, to support more enhancement of biodiversity and more support for transition to environmentally enhancing activities, we will need to pursue funding innovations. In public funding, we need to consider redirection of existing subsidies as a critical measure, switching from environmental pressure to environmental enhancement. Channelling the revenue of environmental taxation and considering the general budget of tax and spend are other options. There may also be opportunities to harness private funding and EU supports, and these will need to be explored.

We know the current approach is dysfunctional and we know that we cannot stand still. We need to reconsider our priorities and put farmers, rural livelihoods and nature at the centre of what we do. We need to reflect on what a flourishing and prosperous future would look like. We need to move from preserving stasis to building vision and collaboration, from an economics of the status quo, to an economics of change, and from a policy of survival to a policy of flourishing for sustainable well-being. The interests, identities, values and voices of the people concerned, particularly those in rural Ireland, are central to moving from the challenge to the opportunity.

An Cathaoirleach

I will go to members shortly and remind them that we have agreed there will be five minutes for questions and answers. I have two questions for the witnesses. I would like to use my time to allow Dr. O'Hagan-Luff to elaborate on her suggestion that there should be a market for credits for ecosystem services. The challenge we have is figuring out how we tweak the system that we currently have such that we get nature restoration and a reversal of biodiversity loss. Given the system we have, how do we change it, what does that look like, has it been done anywhere else and what does Dr. O'Hagan-Luff suggest?

My second question is to Dr. O'Mahony and I invite Dr. Ní Dhúill to come in if she wishes. Dr. O'Mahony made a strong point around the current system not working for farmers; he was not just talking about it not working for biodiversity but said it is not working for farmers, and he was very clear about that. I would like him to elaborate on that. There might be a slight difference between what he is saying and what Dr. O'Hagan-Luff is saying in that Dr. O'Hagan-Luff is talking about using the system that we have whereas Dr. O’Mahony is talking more about system change. I would like to hear him speak to that system change and how a new system would work for farmers as much as it would work to restore nature.

Dr. Martha O'Hagan-Luff

To talk to the idea of biodiversity credits and to answer a part of the Chair's question, the economic forum produced a review of where this has been trialled elsewhere, and it has been trialled in other countries on a very targeted basis to protect, say, a wood or a particular natural resource.

I feel strongly that public sector money cannot achieve this alone and we need to crowd in private finance. The private sector could bring rigour to a results-based payment system for ecosystem services provided by land. I would see it very much as a blended approach. I mean farmers could benefit from both public subsidies and, in addition, money from the private sector.

On the supply of products to be funded, they exist and there are many excellent examples. There is a collaboration with Farming for Nature that can be funded. It already does very good things and produces very positive ecosystem services. It would be great if that work could be scaled up and the funding provided.

On the business side, the timing is very good because we have regulation coming from Europe under the EU Green Deal.  The Corporate Sustainability Reporting Directive, CSRD, is already operational for some companies. The directive will come down the track for others in January 2024 and for smaller businesses the year after. Companies need to report on their impact on biodiversity. Ideally, they would have something to report that is a positive impact on biodiversity. We think there is a strong demand for this product from businesses and investors. Of course one needs the product to be authentic, verifiable and reliable. The advantage of this is that the product is local and Irish businesses can view their investments. They can view where the ecosystem services are provided and it is quite a local investment in nature recovery.

An Cathaoirleach

Is a similar system to the carbon trading market envisaged but using environmental or biodiversity credits? Has that idea been mooted at an EU level?

Dr. Martha O'Hagan-Luff

On whether credits would be traded, it is in its infancy and has not been done at scale in any country, to the best of my knowledge. As I said, it has only been done for those targeted. Credits have not been traded but only sold and the private sector has funded the protection of the natural resources.

I am involved in trying to conduct a pilot trading scheme, with Trinity being involved. We want any scheme to be research led and for the university to provide stewardship. In order that we have a well managed biodiversity credit, one first needs a pilot scheme and then to develop that. I think that there will be strong demand and there is plenty supply.

On whether the credits become tradeable, we would wait and see how that works. Initially, regarding the sale of the credits, there is a demand and the timing is excellent. Previously that might not have been the case but the regulatory environment really strengthens the case. In the future it is possible that credits could be traded but there is no liquid market in trading them as yet. It does not exist.

An Cathaoirleach

Thank you for that.

Dr. Tadhg O'Mahony

I will first address the element of systems change. There has been an observed truism in the literature of this stage. If one focuses on something that is very discrete such as reducing ozone depleting substances, then it is relatively straightforward to remove that technology and remove that gas from activities. When one deals with systemic problems and opportunities in agriculture and food production, then one needs a systemic approach. This is acknowledged by the committee in its recommendation No. 21, which talked about a strategic approach and in recommendation No. 5, which talked about a plan. The committee has captured this recognition that one must focus on both the systemic side and the finance side. Either on their own will not get us to where we need to go. It is about using the different tools in the toolbox to enable a change. To work towards a systemic change allows one to look at the win-win outcomes for the future of rural Ireland and farmers' livelihoods. Biodiversity allows one to put that together. Finance can enable that but not on its own although it can complement that and is seen as very necessary.

As to whether it has been done in other places, I came across an example in the Dasgupta review. That talks about the reform of public subsidies for Swiss agriculture, which shifted from livestock production to ecosystem services. That has been successful both on income and on productivity as well as on ecosystem services over two decades in Switzerland. It has been done. Th public subsidy bit is quite important. It has been highlighted in the literature quite a few times as this is something that is driving us down a particular route. It is more towards environmentally damaging activities where we need to move towards restorative and regenerative activities. That public subsidy in particular needs to be looked at but also, as Dr. O'Hagan-Luff mentioned, there are multiple elements to finance and multiple moving pieces that we need to look at on the supply and demand side as regards how we can push them towards constructive outcomes, towards win-win outcomes that give us farmers' livelihoods and a bright future for rural development in Ireland as well as preserving and enhancing biodiversity.

An Cathaoirleach

I thank Dr. O'Mahony for that. Could he say more about how the current system is not working for farmers? We can say it works for a certain proportion but is it fair to say that for the majority, the system is not working? That was a strong message in his opening statement. If he wants to say more about that, it is an important message to go out.

Dr. Tadhg O'Mahony

Absolutely. The NESC report on just transition noted this, based on a Teagasc survey. About 45% to 50% of farms are economically vulnerable. That is a system that is not working on a livelihoods basis. We also know it is not working on a biodiversity basis so we need to prioritise livelihoods and biodiversity and see how we can put them together. That comes back to things like the strategic vision for the future of the country and how we are aligning and financing an investment in public subsidies towards achieving those goals. At the moment it prioritises maximising production for export markets where there are benefits for a small minority of actors. It does not favour the public good. It does not favour biodiversity and to be honest, it does not really favour the future of rural Ireland. We need a strategic approach to move away from that. We can strongly argue that that can be beneficial in multiple different directions but we have not looked at the alternatives enough. Recently some analyses have started to look at changing this but we do not understand the synergies between these goals enough. We do not understand the strategic approach for the long term and we do not understand, although NESC has done some very good work on this, bringing in a just transition for agriculture. We do not understand enough of the voices, the range of voices from rural Ireland and from farming households, and how they can inform what we need to do here and start to work towards those win-win outcomes that we know are there. They are strong in the literature so it is about using them strategically for policies and acting on that.

An Cathaoirleach

Do any of the other witnesses wish to come in on that?

Dr. Martha O'Hagan-Luff

To add to that, I noticed a statistic in the report from the citizens' assembly. It was reported by the Business for Biodiversity platform that the European Commission has estimated that the funding for nature restoration thus far has been 92% public-funded and only 8% funded by the private sector or by businesses, even though they have benefited from nature. From the report and from the farmers who spoke, you can see that many farmers care about nature, being custodians of the land and restoring nature but they also want to have a livelihood for their families and at the moment, those two objectives are conflicting with each other. Can we allow them to do both? Can we allow them to be custodians of the natural world, which they deeply care about, and provide a livelihood and allow them to achieve both those objectives?

Deputy Darren O'Rourke

I thank the witnesses. I have a couple of questions for whoever wants to pick up on them. Something we hear when we broach these issues is our starting point as regards the information we have and the detail in our accounting of our natural resources, of different types of soil types and what contribution individual landowners or farmers are making to biodiversity.

I would like the witnesses' perspective on that. What is to stop us starting with acting now? What are the initial steps that might give us a decent foundation for implementing schemes? What about the prospect of a nature restoration fund and an infrastructure climate and nature fund? What are the factors the witnesses might look for in those as a appropriate designs?

The public versus private funding for this being 92% versus 8% comes as no surprise to me. Dr. O'Hagan-Luff mentioned a trading system not being about offsetting damage done, but in many respects that is what we live with at the minute, if we look at the trading systems we have. I am looking for some perspective on the design of schemes that might appropriately incentivise this new type of economy, as opposed to business as usual, which has been monetised or commercialised in a "nature-sensitive" way that allows lots of opportunity for extractive and exploitative practices.

Dr. Martha O'Hagan-Luff

Dr. Ní Dhúill works with Natural Capital Ireland, so she is very well-placed to answer that question about accounting.

Dr. Emer Ní Dhúill

Definitely. The first thing, is that biodiversity is really location-specific, so it is not the same as carbon, which is the same wherever it is. What we really need is to develop the ecosystem accounts. We already have European environmental ecosystem accounting that uses the system of environmental economic accounting central framework, which kind of feeds into the system of national accounts.

What we need to be looking at and understanding is the extent and condition of our ecosystems, because we do not know what they can provide us if we do not know what condition they are in. One of the things that has come out of a lot of the research that is going on is the lack of data and lack of sufficient maps. The latest land cover map is absolutely fantastic and way better than what was being used in terms of resolution. They were using the Korean map. However, it is only the first iteration and it really needs to be kept up to date. Even though the resolution is good, it does not get into the ecosystem type and we really need that as well. It is investment in finding out about the state of nature in Ireland. The CSO has set up an environmental accounting division and has started developing ecosystem accounts. There is a new regulation coming out as an amendment to the current EU regulation on developing these accounts and it is going to mandate ecosystem accounts for all EU countries. It has been adopted and is waiting to go through the European Parliament and Council now. It is a really important regulation. We have an awful lot to learn, between ecologists, people in research and people in academia. We all need to work together. One of the strongest messages I have is to invest in researching what state our ecosystems are in, their extent and condition.

Dr. Martha O'Hagan-Luff

I might talk about the Deputy's question on offsetting, and Dr. O'Mahony may want to come in afterwards. We have had a market in carbon credits and there has been a lot of scandals in that market. Credits were being sold, sometimes, to multiple investors and sometimes the product did not even exist. The credits were often in far-flung places in South America or Africa, etc., so there was a real problem with verifying and auditing them. The advantage of the biodiversity credits is they go past just climate, because the conversation has broadened and is about climate plus biodiversity loss. They are focused on biodiversity loss, are results-based and are local. We worry about the deforestation in the Amazon, but the deforestation happened in Ireland, though much sooner. We need to restore our ecosystems, but at least we have that verification that it is local. The national capital accounts are crucial then for looking at the return on investment and for monitoring the impact of those investments.

Dr. Tadhg O'Mahony

I echo Dr. Ní Dhúill.

It is a very important point. It can assist the central policy process to have better accounting tools to have better data but, critically, as Dr. Ní Dhúill also said, on-the-ground data is needed. Basically, a land use map is needed. It is in there, as recommendation 67, in the outcomes of the citizens' assembly. It is a very sensible recommendation that the current condition, the current habitat and species that are there are understood in producing the land use map. It is very important to have both that bottom-up and top down.

Deputy O'Rourke asked what elements are needed in a programme to start to look at if we can shift what we invest in in terms of public subsidy. Critically, it has to be nature positive, and not that it is just tweaking but that it is actually regenerative or restorative. As for how do we do that, we focus on metrics such as water quality, species, preservation of habitats and hedgerows. Many different metrics and on-the-ground realities need to be taken into account in devising this but it needs to be nature positive. It needs to focus on restoration. It cannot just come from farmers increasing some of the biodiversity when we think whether we need to expand some of the land we protect and restore. As for the existing land, how do we manage it, as Professor O'Hagan-Luff mentioned? How do we manage that to maximise what it can do for biodiversity? That runs across from our land that is protected for either species or habitats, or peatland habitats, our national parks and in urban areas.

Starting in terms of understanding the staging of capital, it is very important to recognise - Professor O'Hagan-Luff mentioned this - that The Dasgupta Review internationally said there is an ideal, which really needs to be supported, and that this comes from the private sector because it is benefiting. The market benefits from the provision of services that are there, whether it is State or whether it is ecosystem services. It is very important that they are contributing towards that but, at the moment, as The Dasgupta Review said, we do not have enough mechanisms to operationalise that. We do not have the time to completely revolutionise the system. We will need to focus on public funding first while we upscale private, stage it and transition it, as we go along.

Dr. Emer Ní Dhúill

I attended the European Business and Nature Summit in Milan two weeks ago. Obviously, it was all around the corporate sustainability reporting directive, CSRD. However, businesses really want to contribute; it has to. Businesses need to assess their impacts and dependencies. That is a hugely important access to finance as well. They are benefiting form our national resources and not putting back into them. It is something they definitely want to do and have to do.

An Cathaoirleach

I thank the witnesses and Deputy O'Rourke. I was going to say, "Professor Bruton". Deputy Bruton is next.

Deputy Richard Bruton

I thank the Cathaoirleach for the promotion. I thank the witnesses for the presentation.

On one level, I am quite frustrated in that it sounds like an awful lot more research will be done before any of the models they are talking about can be delivered. Given the sense of urgency, the best is the enemy of the good. I suppose my question is: can we start straightaway? Are there shadow prices in biodiversity that we could make a stab at what a piece of land, that was managed in a way that is different from today, would generate in terms of gains? I accept we were told with peatlands rewetting that anything from 1 tonne to 10 tonnes could be saved and no one could price it, and everyone threw their hands in the air and nothing really emerged. Can the State take the risk in getting it wrong but set up a a set of rewards, and if, in five years, we find it is wrong, the State takes the hit and we end up paying some farmers more than they ought to have got for what they did?

We need to move on this. The allied question is how close is ACRES and all those pricing regimes to being something we could go much wider with. The problem, as I understand it, is we just do not have the bandwidth to get enough involvement at the moment.

I used to be an economist. If the yield is between €8 and €38 and the cost is €1, there is immense room for rewarding people and paying for the mistakes we made, if those numbers stack up.

We will have Department of Finance officials in later on. They are pointing to the EU taxonomy, the new climate and nature fund, the 10% for biodiversity objectives in the EU’s funding programme and their own investment and lending schemes and how they are prioritising green projects. If the witnesses were here with the finance officials, what would they say to them? How close are those objectives to being the way we should go? If they are not, can we change the way the EU taxonomy works and change the shadow prices? I think the shadow price of carbon is €100 a tonne. Can we have a shadow price of water purity or something?

I think the witnesses are trying to approach this from finding prices, which seem to be very uncertain, and then leveraging both private and public investment because there is a big return. Is it not more productive in the short term to talk about targets? I understand that in the south east there are some commercial people looking at the river basins – the Nore, the Suir and the Barrow – and saying “These are polluted. Let us make that the target and let us orchestrate the people around it.” Therefore, there is a channel for public money and we know exactly what we want to do. We can measure the water as we go along. Is that not a better way than this hoping we leverage a whole revolutionary system that will change the way people make decisions? It seems the other one is a little bit more tangible. We could find the worst river basins, get cracking on them and channel our funds into that.

Dr. Emer Ní Dhúill

On the starting point of ecosystem accounts and understanding what we have, there are projects already going on in Ireland between Trinity, UCD and in Galway. They are looking at different scales. The Irish national capital accounting for sustainable environments, INCASE, project, which was funded by the Environmental Protection Agency, EPA, was just completed this year and good learnings came out of it. It is working on data that are already there - for example, it could be the water framework or habitats directives - but it is limited data. However, we have to start somewhere. We work with the data we have.

There is also a forestry ecosystem services project ongoing that is looking at developing a tool for foresters to make transparent decisions on how they forest. That is with Coillte and Trinity College.

There are definitely projects that are getting us to get this understanding. There are projects on wind farms and carbon farming as well. It is happening. We cannot wait to have everything perfect; we have to start now.

A number of countries are already doing national natural capital accounts. The UK and the Netherlands are good examples of that, and they take slightly different ways of doing it. Both are using the system of environmental economic accounting – ecosystem accounting – methodology. The UK looks more at the ecosystem services and giving a monetary value for that, which is important, but it is not accounting for the condition and extent. The vulnerability there is that we do not know what condition these ecosystems are in. The UK has it strongly linked with policy, so natural capital accounts are part of the planning development as well.

The Netherlands takes a more holistic view. It looks at the ecosystem accounts, extend condition and ecosystem services. It would be beneficial to be able to touch base with these countries that are already delivering to discover what challenges and successes they have had. We are not waiting for everything to be perfect. It is already starting so it is about continuing the momentum.

Dr. Martha O'Hagan-Luff

I could not agree more. We cannot afford to wait. We need to take action straightaway. Nature is very complex, as are ecosystem services. We never have perfect data but we need to get on with it and take action.

ACRES is a good first step in the right direction but it could do a lot more. It could be ambitious and targeted and not capped in terms of how much farmers can gain from taking actions. It is interesting to read the objectives of the CAP. Having moved away from food production, there are now ten objectives, of which food production is just one. It is very consistent with the objectives of the CAP. The Deputy asked about targets and whether we should not just try to achieve certain things. I agree completely. We need to get on with it and soon. We do not know everything but there are certainly some very straightforward things where we know what good look likes. Where we have gaps in our knowledge, that is fair enough but we know we need more trees. Only 2% of our land is covered by native woods. This is way behind the European average so that is very straightforward. We know that when planted in the right place, native trees are very good for biodiversity, water filtration, etc., so we do not need to wait on that. We know that is good and that we should invest in it. We know rewetting bogs is very positive for carbon sequestration and native woodlands are very good for biodiversity.

We have some EU-funded projects. The Burrenbeo project, which has been running for 13 years, was funded by EU LIFE. It is no longer funded but has received awards in Europe for doing biodiversity very well on farms. Another project, the Wild Atlantic Nature project, is also funded by EU LIFE. Part of the mandate of these EU-funded projects is to gain private capital as a result. Through the co-operation of ACRES, we have pockets of more targeted funding.

I do not think we will ever get there in the sense of this being perfect but I agree we should get on with it and acknowledge that we might mistakes. We fund the arts, health and education. How is the return on investment in the arts measured? It is very difficult to do so but the Government still does it. It recognises that the arts are a public good. People think financial accounting is very black and white and everything is known but it is not. Accounting has evolved over decades and still does not get things right. There are still grey areas but it does not mean companies were not asked to produce accounts.

Dr. Tadhg O'Mahony

A strategic approach is needed. We can also focus on prices. Regarding relying on prices and pricing on its own, the literature on reducing greenhouse gas emissions says this just will not do it. Even financing at the moment is not aligned with achieving the kind of transition and transformation we need. I prioritise highlighting the word "crisis". We are in a crisis and recognising a crisis means transformation is needed. A short-term and long-term approach are needed to work on those low-hanging fruits and the things we understand more. How can we change our system of subsidies to something nature-positive? This can be worked on very quickly. Our strategic long-term approach probably requires more research but that does not mean that we do not do it. Both should be done at the same time. A lot of economic analysis is showing us those benefits, which are benefits to the wider economy, when those kinds of ecosystem services are valued. Typically, however, they are not priced in the market. That is the problem. Relying only on the pricing approach means we will probably not be able to get to a transformative outcome.

The other thing about the transformative outcome - that bigger shift - is that this is how to get win-wins. Focusing on things like technological changes and efficiency changes means we will not get those win-wins and the system will be left the way it is, with almost half of farming households economically vulnerable.

One may tweak some of the aspects and get an improvement of 10% or 20% in some indicators. I would then consider how to take those efficiencies and do those structural changes towards which one gets through a big strategic vision. It is both. It is the pricing and targets and the long-term vision and establishing knowledge and discussions that help us to get there, but it is also the short term. One can be pragmatic in that regard. I thank the Deputy for focusing on it. It is possible to get into it quite quickly.

Deputy Paul Murphy

I thank the witnesses for their presentations. I will begin with Dr. O'Mahony. Many of the observations in his opening statement were very powerful, but the most powerful line was: "The status quo, built on maximising production, cheap food policy and driving export demand for dairy and meat, is not working for rural Ireland or for biodiversity." That is a very important point. It is not said anywhere near enough. It is normally put forward in the public debate that, in effect, on the one hand, there is the interests of farmers, including large beef and dairy farmers and very small farmers and, on the other, there is the interests of the environment, biodiversity and so on. I agree with Dr. O'Mahony, however, that, in reality, the interests of small farmers and biodiversity should be aligned and public subsidies are creating perverse incentives. If he were Commissioner for Agriculture, how would he redesign CAP, in broad strokes? A big part of what we are discussing is shifting away from incentivising a form of agriculture that is unsustainable from the point of view of small farmers and the environment, and towards a different model of agriculture.

Dr. Tadhg O'Mahony

It is an interesting question. It has been stated previously at the committee that this needs to be thought about strategically. We have had reforms to CAP. We need to think about how we can go further with that. As the system is set up in a certain way and driving us in a certain direction, it is very difficult for farmers to get out of this. That is where this becomes difficult. It should not be about blame but, rather, how we empower a positive change. We need to think about the concepts that are informing policy. Sustainability, well-being and equity should be at the top of the list. That includes prioritising nature for its existence value and not just for the value of the services it provides to humans. From that, we start to establish a set of priorities in how we construct, implement and incentivise policies. That is more of a root-and-branch approach. Recognising this is a crisis, that is what we need to consider. It goes back to the previous conversation in terms of how there can be a focus on some of the short-term measures to which I referred. The Swiss model moved from funding production to funding the public good of ecosystem. That can be done relatively quickly. It involves a significant policy change but it can be done relatively quickly in terms of design. Introduction would be the next challenge. Recommendations No. 21 of the report refers to a strategic approach. We do not have a strategic approach that identifies our key priorities, namely, sustainability, well-being and equity, including farmers' livelihoods, rural households and rural development. We do not have that but we need it, and quickly. We can also focus on some of the short-term changes that would start to get us some wins.

Deputy Paul Murphy

To turn to Dr. O'Hagan-Luff and Dr. Ní Dhuill, I agree with much of what they said. I am sceptical, however, about the main drive towards which they are pushing. Last week, the committee heard about the rights of nature approach. Obviously, they are coming at it very much from the natural capital approach. There are fundamental problems with that which I wish to explore and on which I wish to get their response. On an overarching level, it is effectively doing the same kind of thing that got us into this situation, which is treating nature as something that can be commodified. It is attempting to deal with the problem of externalisation by internalising those costs, but it still is driving commodification of nature.

On a more practical level, there are the problems of commensurability. It is exactly as Dr. Ní Dhuill or Dr. O'Hagan-Luff was saying. Biodiversity, even more than carbon, is not commensurate. One cannot swap a flood plain here for a woodland there. It is very difficult to do that and linked to that is the problem of valuing these things. People can explore and try to put a monetary value on them but it is difficult to know whether that value is accurate. We just do not understand how interconnected nature is and how doing something somewhere has a knock-on impact.

On a most practical level, I put it to the witnesses that this is the dominant approach to dealing with climate change and it is failing. There are many studies about carbon offsets which show that most of them are a scam. A recent study in SCIENCE found that only 6% of billions of euro of forest carbon offsets were definitely reducing carbon. A good portion was definitely just nonsense and another portion was dubious. It is not working for climate. Maybe it is working but the evidence suggests it is not. Why would we go for the same sort of approach to biodiversity?

Dr. Martha O'Hagan-Luff

The Deputy asks a valid question. The carbon offset market has, in an unmitigated way, not been a success. One would proceed with caution but we need private sector funding to solve this and to invest in nature. We cannot just walk away and leave nature. We need to restore it and to help it to regenerate. Money is needed in order to restore it. There is a moral responsibility for businesses to contribute to that because we have all benefited from extracting from nature. It is about how best to do that. I do not want to throw the baby out with the bathwater. Carbon offsets have not been successful, so people would rightly proceed with caution with this, but it is a useful tool to get that capital, if we can.

I completely agree with the resistance to the idea of valuing and commodification. Ideally, we would have rights of nature. We have human rights. Why do we not have rights of nature? There is a colonial viewpoint where we think we can just dominate something and extract. I think it is a tool. If we do not put any value on it, then it is zero on the balance sheet, and, unfortunately, balance sheets and spreadsheets start projects. If one was looking to build a block of flats in a car park or in an ancient oak woodland, at the minute, the only cost that one pays is having to take down those trees. Would it not be good to say that while the car park cost nothing, it caused €100 million in value in woodland to be destroyed and that woodland took 200 years to grow? I want that minus €100 million, or whatever, to be in the spreadsheet. It is hard to value. It is intangible. I go back to things like trying to value our investment in the arts and trying to choose the least tangible, but we still do it. We try to put a price on things because that is how the system works.

Deputy Paul Murphy

There might be a problem with the system.

Dr. Martha O'Hagan-Luff

There might be a problem with the system but we need to push back against that.

I think The Limits to Growth report referred to the zero on the balance sheet as a big problem. Nature has been a zero. From the perspective of investors, I have looked closely at reports which refer to biodiversity credits or forestry credits. They all have a financial return. There should not be a financial return. They must be talking about timber supply, which is just one of the benefits. The European Commission has done great work. There is a report stating that when 15% of the value of forestry is timber supplies, 85% of the value of a forest is from other ecosystem services. Businesses need to look at that. Regulation is pushing them that way and stating that it is not just about financial return but value in a broader sense. They need to look at the value they are creating for society and nature. Nobody is promising a financial return with these credits. There is no financial return. One is putting money towards nature restoration and the return is the nature-positive impact that one is having. The minute it is said there is a financial return, I would be dubious about what is going on with the project in question.

Dr. Emer Ní Dhúill

On putting a monetary value on nature, as Dr. O'Hagan-Luff said, it is a term to which people can relate. If someone hears of the pollination of value and a figure is put on it, then it really drives home its importance. It is not for sale; it is a value of it. With the natural capital accounts, physical accounts on the extent and condition can be developed and there can also be monetary accounts. The INCASE project I mentioned earlier has recently finished working on four different catchments in Ireland. It did not provide a monetary value at the end. It gave physical accounts and options on how one could value it. It was a lack of data. The project was not going to throw out a figure so it provided accounts on the extent and condition. It is important to say nature is not for sale; we are just letting people understand the value of it.

Deputy Jennifer Whitmore

I will pick up on some of Deputy Murphy’s questions. To clarify, the witnesses are not proposing biodiversity offsets.

Dr. Martha O'Hagan-Luff

No, they are biodiversity credits. As I said in my statement, the purchase of such credits could be viewed as an investment in nature recovery rather than an offset for damage caused. We have seen how offsets have not worked.

Deputy Jennifer Whitmore

Okay.

Dr. Martha O'Hagan-Luff

It is excusing businesses to continue business as usual and we do not want business as usual. Businesses need to completely change their business models. One of the suggestions is they need help to do that. Under the corporate sustainability reporting directive, they will have to report their impact and dependence on biodiversity but centrally they really need to change what they are doing. That is what we need to happen. It is two separate things. We need restoration and private sector funding for that and that is not to excuse whereby they can say “Grand, we can continue doing business as usual” because we absolutely cannot. We need reporting on those impacts and then to fundamentally change how a business operates in its own operations and its supply chain and that needs a lot of support.

Deputy Jennifer Whitmore

I would be very concerned if there was even a potential to go down that road. Just look at Australia where I think a developer had a $600 fee to pay to destroy a koala habitat under the offset programme that was set up by the New South Wales government. That is something that we would not want to endorse or in any way go in that direction.

Dr. Martha O'Hagan-Luff

No.

Deputy Jennifer Whitmore

Any of these measures would also have to be supported in parallel by really strict regulations on what can happen. Take, say, a woodland on a developer's site. That would have to be protected for being there, essentially.

Dr. Martha O'Hagan-Luff

I know. And ideally, legally protected.

Deputy Jennifer Whitmore

Absolutely.

Dr. Martha O'Hagan-Luff

Protect it as we do heritage buildings. If we have a 200-year old oak forest, can we have legal protection? We put a value on to say it has a value and for people to recognise all the things. We look at an oak wood and think it is beautiful. We might think of carbon sequestration but we might not think of water filtration. So it is more about recognising the value but to leave it sacrosanct and untouched and that any contribution a business makes is not to excuse it or allow it to do business as usual but rather to pay for damage it might have done in the past. I totally agree that offsetting is a very dangerous concept and one about which I would be very worried too.

Deputy Jennifer Whitmore

Okay. On the current system, our budgets and how we budget, sometimes a certain amount of money might be set aside for particular programmes that are valuable and for positive things to happen but we are not seeing the system change across the entire budgetary spectrum to really effect the shift we need to see. Is that a concern about our budget that we do not have a cohesiveness across government? We might have a really good programme such as having biodiversity officers in each council which might cost €1 million a year but at the same time, a lot of biodiversity damage is happening. The Economic and Social Research Institute, ESRI, and other agencies look at our budgets to see whether they are progressive or regressive from a social perspective. Would it be worthwhile to have an assessment of our budgets to see if they are environmentally progressive or regressive on the whole?

Dr. Martha O'Hagan-Luff

I will hand over to my two colleagues as I think they have things to say on that, but it needs to inform everything that we do. As has been said, we can have positive biodiversity and then have something destroyed on the other hand. It should inform everything. We have always thought about our produced capital and our human capital. Right there alongside those two things we must have our natural capital. It is not an add-on, an extra or something that is nice to have, it has unfortunately been excluded and needs to be centre stage. I will hand over to my colleagues.

Dr. Emer Ní Dhúill

I am just going to go back to what Deputy Whitmore mentioned about businesses and their biodiversity offsets. In regard to the CSRD, impacts and dependencies have to be assessed but they must also have actions for avoidance and restoration. Disclosure is also very important so that people can see exactly where the impacts are and what they are doing about it. I just wanted to bring that bit up there.

Dr. Tadhg O'Mahony

A number of recommendations that are already in the citizens' assembly report speak to some of the issues we are touching on. No. 5 is a plan for the benefit of biodiversity and people. No. 21 is a strategic approach. Dr. O'Hagan-Luff mentioned No. 31, the rights of nature. There has been a debate in the literature for some time that has been pretty much resolved at this stage. If we just focus on indicators, often we do not change anything. If we perhaps change the conversations at the margin, they can be really beneficial if we put them into a strategic approach so that things flow. For example, do we enumerate the rights of nature in the Constitution? What is our strategic approach? Where is our funding coming for this and what is the magnitude of that? Are we actually changing policy or are we just changing how we speak about it a little? That comes through in the citizens' assembly report and recommendations.

For me, it speaks a little bit to the question from Deputy Paul Murphy as well. If we only rely on pricing and accounting, it might be infeasible that we would actually get anywhere. Parts of the current system do respond to that, so we should include that in an overall strategic approach and then we hit it from multiple angles. Systemic problems need systemic solutions. Finance and accounting pricing is one of them but we also need to think about the legal policy frameworks, the incentives and the strategic approach.

Dr. Emer Ní Dhúill

In relation to the natural capital accounts, we say that this is a really useful tool. It is not a silver bullet. It is not going to fix everything but it is a really important tool to use.

Dr. Martha O'Hagan-Luff

I met Brendan Dunford from the Burrenbeo Trust yesterday and he has a lovely line about the head, the heart and the pocket. The heart is knowing why you should do it and wanting to do it. The head is how to do it; the practical steps of what is the right thing to do, and then the financial incentives. As Dr. O'Mahony says, we need to come at this from all angles. Different things will work for different people but we need to know where we want to get to and what the goal is. The nature restoration law is fantastic and gives us at least an initial target for restoring nature and then we can come at it from as many angles as we can to get to where we need to go.

Deputy Jennifer Whitmore

I thank the witnesses.

Deputy Steven Matthews

I am grateful for the opportunity to engage with the witnesses. In response to Dr. O'Hagan-Luff's reference to the valuation of trees versus the car park analogy, we need to go back to Brehon law nearly 400 years ago when a value was put on oak, ash and other trees in this country. I do not suggest we go back there but we did do that once. There could be a Private Members' Bill to reintroduce Brehon law.

Especially given the weekend's flooding we had in east Cork, I want to discuss the value of nature in preventing downstream flooding. It is a difficult concept for somebody who just sees the fact that if we pour 1 m or 2 m concrete walls along the river, we protect the town. It is hard to convince people to alter land use upstream, to plant and create more absorbency to prevent that rush of water coming down. We can understand the difficulty. People want concrete walls, not something that is going to take years, even though we know it works.

My first question relates to that challenge. How do we prove and convince that it is a far better use of money, and that it would require far less money, than constant €25 million flood prevention schemes that channel the river and block communities from accessing something they have accessed for many years and impact on biodiversity?

There are a number of issues in that area. For a start, the Arterial Drainage Act 1945 conflicts with what we are trying to do in flood prevention work. I see where it was of use in the past but we have gone way beyond that. It seriously needs reform. Part of the issue in dealing with upstream nature restoration is that we have to deal with the OPW, the Department of Agriculture, Food and the Marine, private landowners, Teagasc and a whole range of actors. Do we need to create a single agency that looks at upstream nature restoration to address downstream flooding? Councillors also have a role in this. I note the Office of the Planning Regulator, OPR's, recent comment that it has had to issue more than 40 recommendations on the zoning of lands covered by flood risk mapping. There are many challenges in that area. Is evidence available or how can we convince, for example, the Department of Public Expenditure, National Development Plan Delivery and Reform and the OPW, that it is better to spend that €25 million upstream on soft engineering than to try to pour concrete on a river?

My heart goes out to the people we saw in Cork last weekend desperately standing in their sitting rooms and in businesses with stock floating by who desperately stated that the river needs to be dredged or cleared. I understand why they think that is a solution but it is not. We would just getting higher volumes of water coming through more quickly and probably further damage. That is not the solution. How can we convince the people who spend and invest the money? I see an environmental, social and governance, ESG, opportunity, which is why corporate ESG opportunities have been mentioned, to invest in upstream nature restoration. Upstream soft engineering would actually create more employment than the building of flood plains or defences would. Flood defences are the ultimate in any management system of an end-of-pipe solution. We need to look at what is coming into the system. That is the challenge. How can we convince people that if we spend €5 million upstream, we will save €25 million downstream while also protecting towns and villages and not simply shunt the problem on to the next town or village, as happens when those walls are poured?

Dr. Martha O'Hagan-Luff

We need to look to nature for nature-based solutions. The Deputy already sounds convincing. What he said makes perfect sense. Dealing with the issues upstream is much more sensible and cost-effective. It is better for employment and for the future than sticking concrete downstream. Everything he said makes sense. I do not have an answer to the question of how to convince people. I do not know anyone could argue with what he said. We need to look to nature for the solutions. They are there. We must believe in that. I suppose research could be undertaken such as a cost-benefit analysis, hopefully quickly enough to be able to start the work that needs to happen. It would not take much research to come up with the answers to what will work, what is most cost-effective and what is best for the communities in the longer run. The issues all seem to be aligned.

An Cathaoirleach

I will jump in on this. Something that has been troubling me in recent weeks is the pseudo-science of cost-benefit analyses. We use this methodology when we invest public money in anything and for good reason. We want to figure out whether it makes sense and have to be careful about how we invest public money. Does Dr. O'Hagan-Luff have anything to say about how good cost-benefit analysis is at capturing the true values and the true costs, besides the immediate and direct ones? We were hoping to have officials from the Department of Expenditure, National Development Plan Delivery and Reform before the committee in the second part of this session but they were not able to attend. It is perhaps more a question for them, but does Dr. O'Hagan-Luff have anything to say about cost-benefit analyses and - I am inclined to say - pseudo-science? It is regrettable that we make these huge decisions on spending public money on something and if we look at the it retrospectively five or ten years later, whether an investment was made, we generally find that the wrong decision was made.

Dr. Martha O'Hagan-Luff

I will come in quickly and then hand over to my colleagues. The point loops back to what Deputy Whitmore said about this feeding into everything we do. When we talk about costs and benefits, we need to look at the environmental and social costs or we are not looking at the true cost. When we consider the benefits, we must look at the environmental benefits and the benefits for communities. We must look over the longer term. I do not think cost-benefit analysis, as such, is not useful but if we are only looking at financial costs and returns, it is a disaster because that analysis will come up with the wrong answer. Any consideration of costs and benefits must include the social, community and environmental aspects or there is no point in doing it. It must be done properly.

Dr. Tadhg O'Mahony

Recommendation No. 101 in the report refers to nature-based solutions and a whole catchment approach to flooding, which is exactly the point to which Deputy Matthews is moving towards. It is shown in the literature that typically a wider set of win-win outcomes and a wider set of synergies are available by going further back in the system rather than going to the end-of-pipe position, as he mentioned, in the risk management framework. We need to understand the catchments. We need to put on the table considerations around managing these catchments in a different way. What does that look like and what does it deliver? We do not typically know if that is an option. We need to study these options and get better awareness and information. Typically, a flood happens and people are distressed. We hear people in the media saying we must dredge rivers and put in walls. Such solutions often export the water further down. Responding to floods is about slowing the flow of water. We cannot get rid of the water. It is about slowing its flow. If we canalise upstream, that can create a motorway for the water to go quicker downstream and flood people further down. We must take a catchment-based approach and a nature-based solution approach has proved beneficial internationally in achieving that.

I have concerns about the system of project appraisal and cost-benefit analysis. Looking strategically across how we use cost-benefit analysis in Ireland and how it is implemented, it does not encourage a strategic approach. It does not capture risk. It can also subsume values that are very important to us, such as well-being, equity and nature. Those considerations can completely drop off. Exporting political decision-making to net present value is overly reductionist. It could be said that relying too much on cost-benefit analysis prevents us from looking strategically at solutions, getting at win-wins and better outcomes. I have concerns about how those analyses are applied in Ireland at the moment. In some cases, it can be useful but to take a blanket approach to its use as we try to understand whether we should give a green light to a project is problematic. It often favours the status quo. That is a problem of cost-benefit analyses.

Dr. Emer Ní Dhúill

I will go back to the Deputy's question about how we convince people to invest in protecting nature and nature-based solutions. The extreme weather events in Cork are devastating for the people there. We know it will only get worse. We know the status quo is not working. We know that the rock armour defences that are often put along coastal areas push the energy down to the next area. We must change and nature is what will allow us to do that. We cannot think of climate change and biodiversity loss as two separate things. They are completely intertwined. We need nature to help us with this. It goes back to the condition and extent of ecosystems. If they are not in good condition, they are not going to be able to provide the solutions we need. It is about ensuring that our ecosystems can provide the services on which we rely.

Dr. Martha O'Hagan-Luff

If a cost-benefit analysis is only done on financial means, it should not be used at all. It comes back to why we want to value nature, social gains or equity, as Dr. O'Mahony said. Unless those factors are on the spreadsheet and balance sheet, it is pointless to use that methodology. The methodology is deeply flawed if we are not including those hard-to-value factors. We either get them in and get a value for them or exclude them.

It is a very flawed method if we do not include them.

An Cathaoirleach

Senator Pauline O'Reilly is next.

Senator Pauline O'Reilly

I thank our witnesses for coming in today. I want to go back to an issue that I raised with them previously when they made a presentation to Deputies and Senators in the audiovisual room, namely the public service element of this. I have just come from chairing a meeting relating to a public service performance report for one particular Department. What was fascinating was that in the Department's report on how it is spending its budget there was not one mention of climate or nature. It is clear that we have an issue across Departments. I asked a question about one particular element and was told that a representative of the Department of the Environment, Climate and Communications sits on the committee. This is the main issue, this siloing and the belief that as long as there is somebody in the room it will be grand, whatever the outcome, and if climate and nature does not make it onto the balance sheet, that is grand too. This goes back to the point made by Dr. O'Mahony on reductionism. I have a concern, having listened to the conversation, and I hope our guests can alleviate it, which is that we would have a spreadsheet, a balance and would plug in all of the numbers and out would come one number at the end. As I understand it, that is not what our guests are talking about. They are talking about everything being looked at financially. It is not that we are saying that we still make the decision at the end to go with the most cost-effective thing. It is actually about saying that we have to take nature into account in every financial decision that we are making. That is the aim in the context of public service. This could be of real benefit when it comes to setting budgets every year and when it comes to transparency in relation to how those budgets are spent.

My second point is that people who are involved in business are regular people like you and me. They are not just out to make profit for the sake of it. They want to do the right thing but where society and the State fails them is in not providing them with the opportunity to get involved in protecting nature on their terms because those are the terms they are faced with. We have seen it in relation to the circular economy, for instance. Unless we put the regulations in place, we are not allowing them to make a business decision because it will have such a financial cost to them. Their business would fail if they did something when they are not helped by the State to make it financially viable.

Dr. Tadhg O'Mahony

I will respond to the first issue raised by Senator O'Reilly on cost-benefit analysis. Cost-effectiveness analysis can also be included here. The fifth assessment of the IPCCC devoted a really good section to what it called the limits of economics in guiding decision making. It addressed some of the questions I mentioned earlier like how we manage risk, how we manage the different priorities of public policy, including well-being, equity, nature and biodiversity and how we handle the ethics of how we weigh that up. If we push that into a net present value calculation and that is what guides our decision making then we are not doing the politics and policy that are necessary to actually make wiser decisions about what we are doing with resources as well as what and who is impacted by these challenges. Biodiversity is one of the things impacted but of course, it does not have a voice. There are real challenges with reifying a technique like cost-benefit analysis or cost-effectiveness analysis as the arbiter of our decisions when it does not take into account the different risks in different areas.

Let us take the example of a cost-benefit analysis on a high capital investment like a railway or a road. We can value that and put a significant value on the biodiversity but when it is squashed into the net present value calculation, it just falls off because it is too small. That has been observed in the literature. The cost-benefit analysis on its own then becomes part of the problem. It often favours the status quo because it can undervalue long-term benefits and overvalue the impact of the capital investment. It can also undervalue all those other aspects of risk, ethics and the priorities of society. It is effectively taking on a strategic role to which it is not suited. That is why I said I have concerns about overly relying on cost-benefit analysis and cost-effectiveness analysis.

They are tools but their limitations need to be known. In terms of regular people, absolutely, this is something I try to put into my statement. We are speaking about regular people who have a stake in this working better and they are often under pressure in terms of the economic pressures and trying to have a viable business. They also feel like they are being criticised and blamed and it is understandable that they feel this is not fair. That is why we need to work on these kinds of short-term changes but also on that strategic approach, recognising that it is not working for rural Ireland, for most farmers, and for biodiversity and to see how we can incentivise change and create opportunities. We do not have a system that allows us to do that, broadly speaking, because it is focusing on maximising economic production and maximising export that is not aligned with achieving win-win outcomes.

Dr. Emer Ní Dhúill

To answer the Senator's business question, on foot of the last national biodiversity action plan, one of the actions there was for a business and biodiversity platform to be delivered in Ireland. That has started. One of Natural Capital Ireland, NCI's, projects is a business and biodiversity platform and the aim of it is to work with businesses to learn from them but also to guide them in relation to the corporate sustainability reporting directive, CSRD, and the impacts that will have, especially on small businesses. The big businesses have the financial and people resources but it is a very big ask for the smaller businesses. How do we get this information? How are we able to resource it? What we are trying to do with the platform is that we have already developed a community of practice to learn about the challenges different businesses have from semi-States to private businesses. Everyone is feeling very challenged around CSRD but we know in particular that it is the SMEs and even the micro-businesses that do not have to report under but are still part of the value chain so there will be an expectation from other businesses just to get some kind of information on impacts and dependencies and again this is something the Government really needs to help with as well, especially for small businesses. Again, the larger businesses should also be investing in this to help the smaller ones.

Dr. Martha O'Hagan-Luff

I thank the Senator for her question. According to Kate Raworth who wrote Doughnut Economics, the economy is a wholly-owned subsidiary of the natural world. We need a mindset change, that we do not see it that way. We think nature is a nice-to-have. That needs to shift and we need to turn that upside down. We are a subsidiary of the natural world and we need to consider the impact of everything we do. It is very concerning that it was not front and centre. Ideally, there would be legal and constitutional rights for nature and every citizen would have a deep respect and reverence for nature but in the meantime when we do not, we do have these cost-benefit analyses. What I am saying is that I do not think finance can fix it all but, by God, we need to be getting those values in to make them part of the conversation and to stop the continuing damage. Ignoring nature and ignoring the impact we are having on nature will ultimately put ourselves at risk, so let us get it in there. There should be no conversation where it is not discussed.

The last thing I would say is about intergenerational equity. Wales had a Minister for future generations where every government decision had to take into account, whether it would be good or bad for future generations. Sophie Howe came to speak to us in Trinity. She was amazing and it just made so much sense that when roads were being built, they had to talk about how it would impact our children. Should that be in cycle lanes, etc. Intergenerational equity is really important and again nature should be in there and future generations should be in every single conversation and decision.

An Cathaoirleach

Up next is the person in the Green Party who talks about future generations all of the time, Deputy Ó Cathasaigh, who is our resident expert.

Deputy Marc Ó Cathasaigh

I am never one to miss an opportunity to bore people about it. I am really enjoying this discussion. I am reminded of the Alain de Botton book, Religion for Atheists. This is like nature for economists or nature for accountants. It is trying to put a number on that spreadsheet so that things that are often discounted as externalities are counted in there. It is one of the reasons I enjoy talking with people who are approaching ecology from a religious point of view because they understand intrinsic worth.

What the witnesses are trying to do is to interpret intrinsic worth and put it on the balance sheet so that people can understand it. Our current metrics, such as GDP, just represent the gaping maw of capitalism, which does not care what it eats but only cares about throughput. When we measure our economic performance based on throughput alone, we completely lose sight of stocks versus flows. GDP only measures flows.

I have a good few questions. I will put them individually to Dr. O'Mahony and Dr. O'Hagan-Luff. Dr. O'Mahony has done a lot of work on future forecasting. I recently read Towards a Fair and Sustainable Europe 2050, a report from the EU Policy Lab. Unlike most of these documents, which are terribly dry and difficult to read, this report forecast four different scenarios in terms of climate and net carbon neutrality. It forecast four different scenarios and then backcast from there to determine the policy objectives that should be pursued to achieve those goals. I was very struck by something in Dr. O'Mahony's opening statement. He asked what it would look like if rural people, rural livelihoods and nature were at the centre of what we did, as opposed to the status quo. One of my issues is that we do not do that vision piece, even in the land use review or land use policy. I still do not have a sense of what the landscape will look like in 2050, something that would enable me to work backwards. Will Dr. O'Mahony comment on that? The Future Generations Commissioner for Wales is an example of how to do that foresight piece, allowing for backcasting into present-day policy. Will Dr. O'Mahony explore that a little bit?

The time horizon for decision-making in politics is the next election. If you are running a large corporate business, it is the next reporting quarter. Those people in east Cork and west Waterford who were flooded out of it want to see something now. There is a political imperative to act quickly, which can be entirely necessary, but things like nature-based solutions are relatively invisible when compared to a concrete wall and, in many cases, take a long time to develop. Will Dr. O'Mahony explore that piece a little bit?

I will ask Dr. O'Hagan-Luff about the green bonds. The Government has now formulated a €3.15 billion climate and nature fund. That is a fantastic initiative that will bear significant fruit in the future. In Ireland, some €150 billion is on deposit. Hong Kong has been relatively successful with regard to green bonds. The UK has been less successful because it got the interest rate wrong. When I look at that €150 billion, I see a resource that could be put to work. Right now, it is sitting in a bank and losing money in real time because the interest rates are so low. I wanted to give Dr. O'Hagan-Luff an opportunity to talk a little bit more about how we could leverage that money. It is not just about the monetary value, but about community empowerment. A lot of people who are facing up to this challenge wonder what the hell they can do about it. Investing in these green bonds would mean putting some of their economic resources to work. I wanted to give Dr. O'Hagan-Luff an opportunity to expand on that idea because she touched on it fairly briefly in her opening statement.

Dr. Tadhg O'Mahony

I thank Deputy Ó Cathasaigh. It is a really interesting question he asks. It comes back to how we understand challenges and opportunities. We have an approach that is effectively dominated by a reliance on economics to make decisions. It is now acknowledged that there are strategic elements that this approach cannot capture. There are elements, risks and different public policy priorities around things like sustainability, well-being and biodiversity that it cannot capture. There is a whole strategic element that needs to be done before. That involves understanding where we can go in the future and where we want to go. If we want a vibrant, prosperous and sustainable future for rural Ireland, we have to ask what that involves.

What is our vision and how will we include the people of rural Ireland in developing that vision, rather than just relying on continuing to maximise economic production and hoping that trickles down? It has not happened and it has also led to a biodiversity crisis, growing greenhouse gas emissions, problems with water quality and a whole host of other challenges. That is why we also need to work on the strategic aspect. We do not have enough of that, although there is a growing appetite for it. For example, "strategic foresight" is one of the phrases that comes through. I understand the Department of Public Expenditure, National Development Plan Delivery and Reform is interested in it. It needs to be considered. It means that risks can be better managed, opportunities can be seen and all of the things that models cannot do can be done. There are some things that models cannot do. They do not handle social, cultural, political and institutional concerns and they often do not deal well with structural changes. It would be valuable to have participative exercises, to sit down with people and ask them how they envision their futures or where they think this will go, based on current pathways. It is a different way of doing things, one based on systems thinking, reflection and creativity. It can excite people and change the policy discourse.

Deputy Marc Ó Cathasaigh

Does Dr. O'Mahony see a role for a future generations commissioner? I know in Wales there was a series of workshops where people talked about the Wales they want and it was done under the Welsh well-being framework. In the Welsh context there were seven outcomes. They sat with people and asked them the Wales they wanted. It would be an incredibly interesting exercise to talk about the Ireland we want in 2050, particularly from a biodiversity and landscape point of view. It would help people understand and it would drive policy direction.

Dr. Tadhg O'Mahony

Absolutely. There is value in, for example, the well-being framework that has been developed in Ireland. Typically, people will ask what those frameworks really change. If they are monitoring trends and doing programme evaluation, are they strategically changing where we are going? We probably need something like a future generations commissioner to do that. An institutional structure or actor that can start to change things is needed. We mentioned things like strategic approach, a central agency for biodiversity, management, enhancement restoration and funding. Institutional structures are needed as they allow you to consider where this can be implemented. Applying futures approaches can allow a different conversation to take place about where this can go and the focus can go on achieving win-win outcomes.

We have acknowledged that we have a crisis and when there is a crisis tweaking is not enough. That means transformation is needed. How do we envision transformation? Systems thinking is needed and it is necessary to look into the future for that. I echo Professor O'Hagan-Luff in pointing out that intergenerational dynamics come into this strongly and that voice starts to come through in where we go forward strategically. Deputy Whitmore pointed in that direction as well. We must examine how this is starting to land in changing policy. Is it just when it comes to budget time that we value some changes? It has a value in the policy process in changing some discussions but is it changing policy when we know we are in a biodiversity and climate crisis and when there are other public policy priorities that we need to platform more centrally?

In futures thinking they call it "Think, talk and act differently" and futures thinking provides a safe space to consider what it would mean if we put these priorities together and what that would look like in the future. The positive visions can become a motivator for change and people start to envision the possibility of win-win outcomes. There is lots of literature that says we can have these synergies and win-win scenarios by using that systemic and strategic approach. It is necessary to look at scenarios that can articulate where we can go. People must be involved in creating them so they have an ownership and their voices are heard.

Deputy Marc Ó Cathasaigh

Does Professor O'Hagan-Luff want to respond on the green bonds?

Dr. Martha O'Hagan-Luff

I would like to make an additional point on the previous question. The futures commissioner is important because, as the Deputy rightly said, we have the electoral cycle and short-term thinking. A futures commissioner gets us out of that and allows the system to incorporate long-term thinking.

On GDP, Bloomberg reported that the proportion of GDP spent on cleaning up after catastrophic weather events is increasing.

Deputy Marc Ó Cathasaigh

Under GDP, it counts. One can say, "Great news, we spent all this money".

Dr. Martha O'Hagan-Luff

Under GDP, it counts. We can say we have got GDP growth because we have more catastrophic weather events. That is what is being measured.

Now I will answer the question that the Deputy asked me, which is on green bonds. The Government has issued green bonds. The Irish Government was the fourth government worldwide to issue a green bond, which is great. However, it is a bond that is sold to institutional investors, the likes of pension funds etc. It could continue to borrow from capital markets, and there is a large demand and a growing green bond market. There is a reason I suggested that it borrow from the public instead. The difference between the green bonds that are currently issued and a citizens' green bond would be the denomination. For most bonds, there is a minimum denomination size of €50,000 to €100,000. We could have a citizens' green bond where it is potentially a €100 denomination. The reason is that while it is a source of funding for the Government, we also need to change hearts and minds. People are panicked about biodiversity loss and climate change. They feel a sense of helplessness. A lot of people do not even know what our native trees are, if one wants to plant a tree in one's garden. My kids, for example, could not have told me a few years ago what our native trees are. We all feel helpless. This is one thing where, if you move your savings from a post office savings bond - or we had the special savings incentive account, SSIA, many years ago - you feel as though you are at least funding nature restoration and are helping. There are also education and public awareness pieces. The Government could then talk about what it is being used for, whether it is nature-based solutions to flooding relief in Cork, rewetting bogs or electrifying bus systems. People then feel that they are engaged, are less helpless and are informed and hopefully, that would then build public support for actions-----

Deputy Marc Ó Cathasaigh

There is a sense of agency.

Dr. Martha O'Hagan-Luff

A sense of agency, with education and support. It is getting hearts and minds, public support and buy-in.

The last thing I wanted to say is there is a UK council - I cannot remember which council - that issued a local government bond. It is the same idea, where citizens fund public work to improve the environment. It was so localised that it was in their local council, which again strengthens that sense of agency. There was also a nice twist in that it offered an interest rate on the bond, which I suggest the citizens' green bond would do as well, in that it would be a savings bond. The council offered an alternative. Instead of receiving one's interest, that money could be spent on planting trees in one's council area. For some people, that does not work. They need a financial return from their savings but for other people, I thought it was a nice additional feature to it.

An Cathaoirleach

I thank Deputy Ó Cathasaigh.

First, before I suspend the meeting to bring in the next guests, I thank our three guests who came in this morning to share their expertise with us. For my part, I found it a very educational piece. I expect that colleagues also did. I thank members for their engagement. The questions were very pertinent and got to the challenge that we have. We got the best out of our guests as well. All of this, by the way, is to help us with our report on the Citizens' Assembly on Biodiversity Loss report. What we are trying to do here is to achieve a political consensus around some or all of the recommendations of the citizens' assembly report. A big piece of that is how nature restoration and reversing biodiversity loss is paid for. This session is going to prove invaluable for us in our consideration of the report.

I thank the witnesses most sincerely for coming in this morning and with that, I will suspend the meeting for a few minutes to allow our next guests, namely, the officials from the Department of Finance, to come into the meeting room. I should point out that we had invited officials from the Department of Public Expenditure, National Development Plan Delivery and Reform. However, they refused our invitation and stated that it is the responsibility of individual line Departments to develop policy in their own areas of responsibility and to implement this policy within the resources approved by the Dáil. In that context, given the subject matter of the meeting, it is directly related to the Department of Housing, Local Government and Heritage.

They felt it was more appropriate for officials from that Department to attend to discuss the matter and inform the deliberations of the committee.

I would just say to colleagues that we will discuss this correspondence in our private session later this afternoon. I know colleagues will have important views on that particular correspondence. I will suspend to allow the Department of Finance officials to take their seats.

Sitting suspended at 12.55 p.m. and resumed at 12.58 p.m.

An Cathaoirleach

I welcome, from the Department of Finance, Mr. David Owens and Mr. Seán Judge.

Before we begin, I will read a note on privilege. I remind witnesses of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. If their statements are potentially defamatory in respect of an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative that they comply with any such direction.

I invite Mr. Owens to make his opening statement.

Mr. David Owens

I am grateful for the opportunity to speak to the committee today. We are pleased to be invited and to contribute to the deliberations of the committee on foot of the publication of the citizens’ assembly report. I am accompanied by my colleague, Seán Judge.

I am the head of the climate and sustainable finance unit in the Department of Finance. Our main area of responsibility relates to overseeing the Department’s input to national and international climate priorities, as well as with regard to sustainability considerations in the financial services field. The climate unit was established some three years ago in line with the increasing focus on climate issues across Government. The unit aims to progress and support the integration and mainstreaming of climate action across the Department’s key functions. In addition, in line with the programme for government requirement that each Minister makes climate action a core pillar of their Department’s strategies, the Department of Finance statement of strategy now includes a climate-related strategic objective, namely, Promoting environmentally sustainable economic progress.

Traditionally, as members will know, the primary focus of the Department of Finance in supporting climate action has been through the taxation system, with a number of environmentally progressive elements to Ireland’s taxation regime already in place.

However, in recent years the remit is expanding. This expansion includes advancing our macroeconomic and fiscal analysis to aid understanding of the effects of climate policies, introducing green budgeting analysis of the taxation system and supporting green bond issuance.

As I mentioned, one aspect of my areas of responsibilities relates to managing the Department of Finance's input into national climate policy and related areas. This has included and will include engagement with the development of Ireland’s fourth national biodiversity action plan, which we understand will be published shortly. In support of the biodiversity action plan, the Department of Finance has committed to include biodiversity in its work on climate and sustainable finance, including taking it into account in financial services, multilateral development financing and fiscal policymaking, as appropriate.

While engagement on biodiversity issues is a new area for the Department of Finance, as it is for many State actors, the importance of addressing the challenge of biodiversity loss, as well as taking advantage of the opportunities associated with the conservation and restoration of nature is acknowledged, as is the mutually reinforcing relationship between biodiversity and climate change, as was discussed in the previous session. We know biodiversity contributes to and enhances climate mitigation and adaptation, while climate change can lead to degradation and loss of biodiversity and the diminution of ecosystem services.

The important work of the citizens' assembly through its recommendations and report on biodiversity loss is also recognised. As I said, we are pleased to assist the joint committee and we will, of course, advise the Minister and the Government on those areas relevant to the Department of Finance.

I would like to set out a number of areas of work that are under way which are of relevance to biodiversity, not all of which are based on raw economic return considerations. First, in terms of the area of sustainable financial services, at an EU level the Department oversees Ireland’s engagement with the EU taxonomy for sustainable economic activities, which is a very important piece of work in defining what economic activities are sustainable, and in guiding and encouraging investors to identify and channel money towards genuinely green investments. As committee members may be aware, the taxonomy is a classification system which specifies technical, science-based criteria for assessing whether specific economic activities make a substantial positive contribution to climate change, do no significant harm to the environment and meet specified minimum safeguards.

Although it is voluntary for companies to spend or invest in taxonomy-aligned activities, financial institutions and certain companies in scope must report on the extent to which their business is aligned with the taxonomy’s standards. In this way, the taxonomy has an increasingly influential role to play in guiding and mobilising investments in activities to achieve carbon neutrality. I will also highlight that as taxonomy alignment reporting becomes embedded in the private sector, it can be expected that it will also become increasingly important for the public sector.

While the delegated acts in terms of climate change mitigation and climate change adaptation have applied since January 2022, earlier this year the European Commission adopted a delegated Act which sets out criteria for the remaining taxonomy environmental objectives, including for the protection and restoration of biodiversity and ecosystems. This sets out conditions for activities such as the conservation of habitats and species.

Ireland has been a strong supporter of the taxonomy and of science-based requirements throughout its development. We, in the Department, will continue to engage constructively during negotiations on the delegated act, which are expected to be concluded before the end of the year.

The Minister for Finance announced on budget day that he would establish two new funds called the future Ireland fund and the infrastructure, climate and nature fund. His announcement also represents an important development in terms of allocating funding for biodiversity and nature initiatives.

The future Ireland fund will be maintained over the longer term with the return on the fund used to support Government expenditure for future generations. The fund will help to deal with future recognised expenditure pressures, including ageing, climate, digitalisation and other fiscal and economic challenges.

The infrastructure, climate and nature fund, ICNF, will help to ensure that the State has resources available in a future downturn to support capital expenditure through the cycle. This would avoid generating backlogs in capital projects due to a lack of spending during possible downturns. The ICNF will also have a climate and nature remit worth up to €3.15 billion. The aim of this is primarily to help the achievement of the national carbon budgets and sectoral emissions targets through the delivery of capital projects. The fund is designed to be used where it is clear our climate targets are in danger of not being reached.

On 12 October, the general scheme of a Bill to provide for the establishment of both funds was published. The general scheme has also been referred to the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach for pre-legislative scrutiny with a view to progressing the legislation as soon as possible.

In addition, EU programmes will be an important source of funding for biodiversity, with the multi-annual financial framework 2021-2027 to provide a minimum annual spend on biodiversity objectives, starting at 7.5% next year and rising to at least 10% in the last two years of the programme, 2026 and 2027.

I mention also the important role of the National Treasury Management Agency, NTMA, which is a body under the aegis of the Department of Finance, in contributing to the funding of biodiversity in tandem to supporting the broader green financing needs of the State. In particular through its funding and debt management function, the NTMA, on behalf of the State, has issued Irish sovereign green bonds, ISGBs, to the value of more than €10 billion, with the proceeds allocated against eligible green projects. Eligible projects are identified across six broad categories, one of which relates to environmentally sustainable management of living natural resources and land use. As outlined in the 2022 ISGB allocation report, eligible green expenditure by the State on forestry and bioenergy was €74 million, with an allocation of €50 million made against this, in line with all other eligible green programmes. The Ireland Strategic Investment Fund, ISIF, managed by the NTMA is also supporting biodiversity, with ISIF’s impact investment strategy including the themes of investments, climate, scaling indigenous business and food and agriculture. A key part of ISIF’s food and agriculture strategy is focused on developing solutions in the land use, land use change and forestry, LULUCF, sector and in the circular and bio economies covering forestry, anaerobic digestion, carbon farming and alternative crops. This will involve collaborations with other State agencies, Irish corporates and international funds. As for ISIF's investment commitments to date, the fund has more than €100 million committed to forestry funds, which at the end of 2022 had 12,500 ha of forestry, of which 1,700 ha was created from bare land, thereby contributing to our afforestation targets. These forests incorporate the planting of native tree species at a level of 20% to 30% of afforestation.

The Strategic Banking Corporation of Ireland, SBCI, also launched the growth and sustainability loan scheme on 19 September. Some 30% of the €500 million loan guarantee scheme is targeted at SME investment in environmental sustainability measures and is being given priority. The purpose of discounted loans provided under this element of the scheme is to address climate change, environmental and biodiversity issues. It should be noted that the growth and sustainability loan scheme is open to SMEs and small mid-caps, including farmers and fishers.

On fiscal policy and environmental taxation, as I mentioned earlier the primary focus of the Department in supporting climate action has traditionally been through the taxation system. There is a suite of environmentally-progressive elements to Ireland’s taxation regime already in place including the carbon tax regime, as well as numerous measures to incentives the uptake of electric vehicles. In terms of measures more directly linked to biodiversity, under section 232 of the Taxes Consolidation Act 1997 profits or gains from the occupation of woodland in the State, which is managed on a commercial basis and with a view to realising a profit, are exempt from income tax and corporation tax. The Department of Finance fully recognises the taxation system, operating in conjunction with other measures, provides an important climate action policy lever. Fiscal measures which help to incentivise the use of greener fuels and technologies and support a move away from more polluting fossil fuels play an important role in the journey to a carbon-neutral economy. Air pollution, including emissions of carbon dioxide, nitrogen dioxide and sulphur dioxide contribute to biodiversity loss and, therefore, measures which aim to reduce these emissions can contribute to tackling biodiversity loss. It is recognised that many fiscal measures aimed at emissions reductions, while not specifically targeting biodiversity, will contribute to mitigating climate change and improving air quality, which ultimately has knock-on benefits for biodiversity. However, it is important to note field expertise is required to ascertain the specific impacts and benefits of these policy measures on biodiversity. This moves beyond the remit of the Department of Finance. That said, we are of course available to provide input on the operation of current taxation measures. If the committee wishes to present expert-informed specific tax policy proposals, the Department is happy to engage and evaluate these measures.

My final point is on multilateral development banks. Through Ireland’s membership of multilateral development banks, the Department of Finance will continue with collaborate with partners to ensure biodiversity is included as a priority within their respective policy programmes. Of note, the Department welcomes the recent broadening of the World Bank’s mission to explicitly focus on biodiversity and nature as a global priority to deliver a liveable planet.

Support from the European Investment Bank, EIB, has also assisted helped to establish Peatland Finance Ireland, PFI, which is developing a peatland standard to standardise the contributions made by investing in peatland restoration to carbon storage and sequestration.

I thank the Chair. I am happy to have the statement published and Mr.Judge and I are pleased to listen to committee members’ views and take questions.

An Cathaoirleach

I thank Mr. Owens for his opening statement. It was very thorough, which we certainly appreciate. Members may indicate and we will make a list. I will go first.

A big part of the discussion in the previous part of the meeting was about the alignment of policy with the challenge we have. Mr. Owens acknowledged towards the end of his statement that many of the very good policy instruments and funding streams he mentioned are perhaps not directly targeting biodiversity, but there would be knock-on benefits that are very beneficial. I have a bit of a concern there might still be a misalignment there. In many ways, I wonder whether Mr. Owens would have said a bit more about the alignment or lack of alignment had he the benefit of hearing the previous discussion. He might have expanded on where we need to get to vis-à-vis the taxonomy. We are certainly going in the right direction when it comes to trying to drive carbon reduction, but perhaps it is not going so far in trying to drive nature restoration. That is only a suggestion and the officials may tell me otherwise if they wish. Has the Department done its own analysis on tax policy, on the taxonomy and the alignment or misalignment and on what the effect of that might be on biodiversity and nature loss? I would appreciate it if the officials could comment on that.

Mr. David Owens

Sure. The taxonomy is just getting to biodiversity, so a technical standard has been published under the delegated Act. Basically, the Council and Parliament allow the Commission to define in this delegated Act the technical aspects of it. That has not been adopted yet. It is very detailed. We have not looked at biodiversity in and of itself. The taxonomy, as the Cathaoirleach knows, covers six things, namely, adaptation, mitigation, biodiversity, the circular economy, waste and pollution, and water. In a way in the taxonomy, biodiversity is not given top priority. It is a factor. It is in there in the corporate sustainability reporting directive, CSRD, that was being referred to earlier and in the work we and our sister Department of Public Expenditure, National Development Plan Delivery and Reform have to do to try to look at aligning budgets towards the taxonomy over time. It simply has not come in yet because it is not fully defined in the taxonomy. However, it is a recognised factor, not least due to the work done by the citizens' assembly. The recommendation that came from the assembly that wants the Department to take a look at the tax system from that point of view is something I feel this committee is likely to recommend, and we will then consider how best to do that.

The measurement issue raised in the earlier session is very real as is how many different aspects we would need to try to put into the hopper and bring down, and have brought to bear on individual taxation. We do green tax analysis. It is published as part of the budget each year. We tag different tax expenditures and taxes as being green or otherwise.

I would say that is a pretty good proxy for whether they would be positive or negative for biodiversity. Again, we would need to look at it with a different lens.

An Cathaoirleach

I will extend the question to focus on green bonds. In the earlier session, Deputy Ó Cathasaigh referred to the €150 billion on deposit in Irish banks. That figure dwarfs the €3.15 billion we will get from a hugely positive measure between 2026 and 2030. Is there an alignment with Irish green bonds and nature restoration, or is there work to be done? Is it very much about dealing with carbon and perhaps the more macro challenge we face, while recognising that the higher resolution piece on biodiversity is very complicated, yet critically important?

Mr. David Owens

Each year, some of the funds from the green bonds are allocated to nature restoration and peatland restoration. As I understand it, those projects are part funded by the green bond proceeds. As we said, there is a huge appetite for green bonds. The NTMA wanted to raise about €3 billion. It was oversubscribed ten times. In the end, €3.5 billion was raised in January. There is a massive appetite from investors for something they can rely on. They feel they can rely on the Irish State. Each year, the allocation report specifies in detail exactly what the green bond proceeds are used for. It also has a third party validation in that it meets a market-based standard. It is not fully taxonomy-aligned, but the International Capital Market Association will give it that level. As I have said, some of that is spent on nature restoration. Some goes on improving the water network and just transition measures. There are different parts to it. Biodiversity comes under the remit of the Department of Housing, Local Government and Heritage. It has to really be embedded as the recommendation that came to us from the national biodiversity plan, NBP. It has to be considered when we are making tax policies. It is one of the many factors that has to be brought to bear.

Deputy Richard Bruton

On a point of clarity, is Mr. Owens saying the NBP comes under the taxonomy or does it not?

Mr. David Owens

The NBP does not come under the taxonomy, nor does the green bond proceeds allocation.

Deputy Richard Bruton

Is that because the taxonomy came after it or is it something that will happen as we go along?

Mr. David Owens

What I personally would expect to happen over time is that investors will begin to demand taxonomy-aligned investments. For example, the ESB has issued a fully taxonomy-compliant green bond. The Irish State has not yet gone there both because the taxonomy is incomplete and also because the EU green bond standard has not been fully adopted yet. In time, we will have to consider that the NTMA will be looking at it, whether or not it is something we can meet. The difficulty is probably finding the projects that fully align with the taxonomy. It is a very demanding standard, as I think the witnesses in the previous session were saying. It is difficult for businesses to meet the standard. Just to give one example, if you are doing a construction project, 70% or more of all the spoil from a site must be fully recycled and go into the circular economy. It cannot become waste. That is difficult to achieve. Finding those projects will be the issue, and getting industry to create a pipeline of taxonomy-compliant projects will be part of what we need to see here.

Deputy Richard Bruton

More generally, what we heard earlier was essentially a critique of the way our investment decisions are made. It was said that the models we use are too reductive and that we are not looking at the systemic or strategic challenge that issues like biodiversity and climate present.

It is inherently incremental, as opposed to looking at whether we require a significant shift in policy. How does the Department react to that critique? If there is more than a grain of truth to it, as I believe, how can biodiversity targets feature in the approach we take? They are hard to price. If there is a cost–benefit analysis, biodiversity tends to be in the also-ran category and hard to value, and therefore gets shunted to the sidelines. How does Mr. Owens react to the critique that at this stage of what is effectively a crisis, we need to have a systemic shift rather than use the models we have?

Mr. David Owens

I keep returning to the taxonomy. It is about sustainability, not just about climate.

Deputy Richard Bruton

However, if we are not able to apply the taxonomy to most of our projects, how do we find a route?

Mr. David Owens

The route the European Commission is taking is that of disclosure, meaning companies have to disclose how much they-----

Deputy Richard Bruton

The State is the company we are talking about here.

Mr. David Owens

The State also has to disclose. For recovery and resilience funding, for example, the State must meet all six do-no-significant harm elements of the taxonomy. In the six I named, there are standards listed. About 37% of the spending has to be fully taxonomy compliant. That implies that €700 million or €800 million has to be in that box.

As I said in my opening statement, the EU budget, to which we are net contributors but from which we draw down a significant amount, is increasingly moving towards these-----

Deputy Richard Bruton

The dilemma seems to be that in most of the frameworks we are trying to address, be they related to land use, river catchment or whatever system we are trying to examine, we do not have the tools under the present model and cannot offer a price or reward for the sort of thing we want to change. In saying the taxonomy will incrementally address this matter, will we have missed the opportunity to take a bigger step back? Does the Department, since it is very much the framework Department through which everyone thinks about these issues, need to recast its approach to some of the systems we need to shift?

Mr. David Owens

With river management and so on, money from the green bond will go into the projects. The State has a longer time horizon. The projects, as the Deputy described them, are probably not commercially viable. International investors want to see money going into them. The State still has to pay a return on the bond. The bond is not free, although there is a what we call a "greenium". In other words, the State has slightly more favourable terms than there would be with an equivalent, non-green bond. Owing to the demand coming from the private sector, as well as from the disclosures that have to be made by private sector companies and increasingly by the State, that is where biodiversity is carried through across the financial and investment systems at the moment.

Deputy Richard Bruton

Are we not leaning on a reed to some extent if we expect the private sector and its demand for green bonds to shift the State's approach to big systemic challenges?

Mr. David Owens

We also have a national biodiversity plan and Exchequer funding going towards it. There is all that limb as well. Regarding all our sources of green funding, including the carbon tax, the green bond and EU funding, it is not enough to say the State is going to pay the money back; we also have to report against where it is going. Therefore, the transparency that applies to the private sector through the reporting requirements, the CSRD etc., is coming to us as well.

It is driving behavioural change. It is partly supply and partly demand but it is clear that it is there. The direction of travel is very clear.

Deputy Jennifer Whitmore

I apologise if I am asking the same questions but in a slightly different way. I am just trying to get my head around this. On fiscal policy and environmental taxation, the Department says there is a suite of environmentally progressive elements to the taxation regime. Did Mr. Owens say earlier that, to date, biodiversity has not been assessed or incorporated into that progressive assessment?

Mr. David Owens

Every year, we look at the budget's taxation measures and tag all tax expenditures as being green or otherwise. We then weigh them up on the blunt basis of how much they cost versus how much some other tax takes in. There is sometimes a judgment call as to whether a particular tax is green or otherwise. With the carbon tax, the answer would be obvious but there could be arguments as to whether certain tax reliefs are really environmentally aligned. We publish all of that. It is set out in what is quite a long table. Biodiversity is an aspect of this but it is one of many. Obviously, we now have legal obligations in respect of emissions reductions so we have a certain interest in driving those down.

Deputy Jennifer Whitmore

One of the examples given references the Taxes Consolidation Act 1997 and its relationship to the occupation of woodland. Are there any requirements for this woodland to be of a certain type or standard to ensure it is positive for biodiversity as opposed to, for example, a Sitka spruce plantation? Is there differentiation within the tax scheme?

Mr. Seán Judge

I do not think there is any particular requirement for the woodland to contain particular species.

Mr. David Owens

No, but there are such requirements in the Department of Agriculture, Food and the Marine's forestry programme.

Deputy Jennifer Whitmore

It is in the programme but not in the taxation system.

Mr. David Owens

I do not think so.

Deputy Jennifer Whitmore

This is a sort of perverse incentive. One of the recommendations from the assembly was there should be a complete review and analysis of each of the taxation and levy measures. Is that something the Department is prepared to undertake?

Mr. David Owens

If the citizens' assembly has recommended it and if this committee proposes it to the Government, it would have to be given full consideration. As I have said, every year, our tax strategy group has a full look at climate and environmental taxation. It is a very detailed piece of work. We also include green budgeting in the budget documentation, as does the Department of Public Expenditure, National Development Plan Delivery and Reform. That Department also tags current expenditure to see how much of it is environmentally sustainable. It also published a paper, which the Deputy might have seen, on environmentally harmful spending. There is research going on within the system with regard to all of these issues. If and when the committee recommends it, we will go into biodiversity as well.

Deputy Jennifer Whitmore

On this year's budget, a €3 billion climate fund was established. When I initially heard of that, I thought it was a very positive step. However, I was disappointed to learn it would not kick in until 2026. I do not know whether the witnesses can speak to the rationale for that decision. My understanding is that, when some people raised the question of why it was not to begin until 2026, they were told that a €2 billion budget was set aside in the summer economic statement and that his would cover nature restoration. When I looked at that economic statement, I saw that what it said was that €2.25 billion from windfall receipts would be set aside from 2024 to 2026 for the delivery of critical infrastructure. From this money, there was to be a contribution to the existing climate action fund for nature restoration and other Government priorities. How much of that €2.25 billion will be set aside for the climate action fund and particularly for nature restoration?

Mr. David Owens

Again, if our colleagues from the Department of Public Expenditure, National Development Plan Delivery and Reform were here, they could probably answer but I cannot.

I can talk a bit about the infrastructure, climate and nature fund and why it goes from 2026 onwards. At the moment we are in the first carbon budget period, which will finish at the end of 2025. The second period starts from that point and that is when it could potentially come into play. We have a hard legal 51% emissions target for 2030. If we were still struggling with our emissions reduction in the second part of the decade, this money could begin to be used to try to address that. It is taking some money off the table now and placing it there to be drawn down if and when it is needed.

Deputy Jennifer Whitmore

Would it not be better off to use it? That is for capital investment and capital investments take time to get up and running. For example, it took a year and a half to get a single electric vehicle charger into Blessington so we are not particularly fast when it comes to investments for climate action. Would it not make more sense to invest now and build those projects now? That would then assist us in meeting our objectives for now and from 2026 onwards.

Mr. David Owens

That is a reasonable point of view but the Government has decided as it has. The reasons for that are massive capacity constraints, full employment and not wanting to spike up inflation any more by paying more for existing services and goods. To move it temporarily down the line a bit is probably the answer to that from the Government side.

Deputy Jennifer Whitmore

The Department of Finance is not responsible for the climate action fund. I understand that is with the Department of the Environment, Climate and Communications but the Department of Finance has an oversight function with it. Is that right?

Mr. Seán Judge

Not particularly. The Minister for the Environment, Climate and Communications writes to the Minister for Finance on funds that are utilised but we do not have an oversight role.

Deputy Jennifer Whitmore

The Department of Finance has some interaction on it then. I have been digging into the climate action fund a bit. In 2021 there was €124 million in the fund, which primarily came from the National Oil Reserves Agency, NORA, levy and only €9.5 million was spent. Similarly, in 2022 an extra €92 million was put in and only €17 million was spent. That means that €189 million is sitting in that fund, which is aside from the NORA levies going in this year. Do we have a problem with spending this money? When you look at the budget and the infrastructure, climate and nature fund, we are saying that we will spend it from 2026 because we cannot spend it now. Is this a similar issue? We have a huge amount of money and we have so many problems that need to be resolved.

Mr. David Owens

These would be matters for the Minister for the Environment, Climate and Communications. However, the economy is at capacity, so by driving more investment into existing areas you would cannibalise from some other area. This can be seen in housing and retrofitting to a degree with the-----

Deputy Jennifer Whitmore

Data centres, housing.

Mr. David Owens

Things are happening there. I do not know and I cannot answer for the Minister, Deputy Eamon Ryan.

Deputy Jennifer Whitmore

That is fair enough. I know it is outside and it is a pity that the Department of Public Expenditure, National Development Plan Delivery and Reform is not here because these are questions that could have been directed to it. It comes back to the point that if we are at capacity now, then we need to start prioritising where the spend goes. We need to ask if we should prioritise the building of a data centre or if we should prioritise the building of housing or the retrofitting of homes. That is the environment we are in.

Deputy Marc Ó Cathasaigh

I did not respond earlier because I am not a member of this committee but I am taking this opportunity to join the debate because I have an interest in this. Deputy Bruton asked a lot of the questions I was going to ask on green bonds, which picks up on the earlier session. I am talking about the existing green bond offering that Ireland has and the possibility of opening that up more. Instead of a corporate green bond we could offer a personal green bond or a green bond at a smaller level that our citizens could avail of.

Our guests from the Department told Deputy Bruton that the existing green bond is not fully taxonomy compliant. Is that right?

Mr. David Owens

Yes.

Deputy Marc Ó Cathasaigh

Is there anything that can be done to redirect the non-compliant element of it to a nature and biodiversity focus? That would respond directly to what we are here to talk about, that is, the citizens' assembly report.

Mr. David Owens

It is open to the Government to allocate the proceeds as it sees fit. From the point of view of the Department of Finance and the National Treasury Management Agency, NTMA, they raise the money subject to conditions they are prepared to meet in the marketplace. Together with the Department of Public Expenditure, National Development Plan Delivery, and Reform, and other line Departments, that money is allocated. Some €10.5 billion has now been raised and much of it has been allocated. A significant proportion of that is for nature restoration and for biodiversity-aligned purposes. That would happen on an annual basis. There is nothing to stop an increased proportion of that going towards biodiversity purposes.

Last year, when he was the Minister for Finance, Deputy Donohoe wrote to other Government Ministers to point out the taxonomy and what it potentially meant for public spending. Trying to align with the taxonomy would make schemes more attractive not only in respect of the ease with which the NTMA could raise money on behalf of the State but also in respect of private sector companies that have reporting requirements. Bank of Ireland, AIB and other companies want to report a green asset ratio. Many financial institutions are now in the low single digits in terms of how much of their investments or lending is taxonomy aligned. They want to increase that. There is a clear match in that regard. Anyone who is looking for spending and can make a scheme fall within the arms of the taxonomy will have a better chance of getting both public and private money.

Deputy Marc Ó Cathasaigh

That is the case under the requirements for corporate sustainability reporting and corporate due diligence.

Mr. David Owens

It is more the former than the latter.

Deputy Marc Ó Cathasaigh

It is more the former than the latter. In Mr. Owens's assessment, there is a real demand for a green bond, or whatever the term might be, or some sort of mechanisms whereby those large corporates can actively invest in nature and biodiversity.

Mr. David Owens

Yes. The investment community wants those opportunities and is struggling to find them. It absolutely wants them. There is money there for those projects if they can be established.

Deputy Marc Ó Cathasaigh

The other part of the equation is the smaller and personalised green bonds. As I said earlier, I know Hong Kong was moderately successful in that regard and the UK was less successful because of the interest rate attaching. It might be small beans in the grander scheme of things but I think there is an importance in terms of the sense of agency, or the lack of it, that people have and which we spoke about earlier. We also have €150 billion sitting on reserve in Irish banks and not doing particularly well because of the interest rates. Even a very small proportion of that would eclipse the size of the climate and nature fund if we could structure it so that people could make investments in that way. What potential exists there?

Mr. David Owens

The State is well aware of that €125 billion on deposit. Perhaps one sixth of that money is related to the pandemic. The Central Bank estimated that pandemic savings account for €20 billion or €25 billion of that. The State is interested in drawing that money into climate positive spending.

Deputy Marc Ó Cathasaigh

If we were to throw that money into the general economy at a point where the economy is already at capacity, it could be inflationary.

Mr. David Owens

That is correct. If that €125 billion is left alone, it will reduce in value by 5% per annum. At some stage, people will not want to see their savings dissipate. They will ask what they are going to do with the money. It could be used for retrofitting, electric vehicles and improving the energy efficiency of homes, buildings and offices. The State has a panoply of grants, including Sustainable Energy Authority of Ireland, SEAI, grants, offering one-stop shops. There are a lot of incentives out there.

Deputy Marc Ó Cathasaigh

It might not be personally attractive to everyone, if Mr. Owens gets where I am going. People who are very well-off might have retrofitted their houses and might be driving electric vehicles. They might have a few bob in the bank.

Could we find a way of putting that money to work from a nature and biodiversity perspective where investment is so needed? That is where the value of a green bond might lie. I am asking for Mr. Owens for his view on this based on his experience, which is far in excess of mine. Would that be a viable product within the Irish market?

Mr. David Owens

Is the Deputy thinking of a small savings green bond similar to the Irish sovereign green bond that is sold to big investors?

Deputy Marc Ó Cathasaigh

Yes.

Mr. David Owens

Okay, so we are talking about a prize bond sized green bond. I cannot speak for the NTMA or my State financing section colleagues in the Department but I guess that if a proposal was made around that, they would look at it. Something has been talked about previously in this space but the point is that an additional piece of work is required. At the moment, we sell prize bonds or savings certificates and that is it but with a green product, we have to stand it up, validate it and assure it. An audit would have to happen and be repeated.

Deputy Marc Ó Cathasaigh

That could be a strength, as we heard earlier, because it could involve the reporting back to individual citizens that their money has been spent in a green way, like we see with the national lottery. I am not making a direct analogy in any way, shape or form but there would be a citizen engagement piece. I know it would create extra work-----

Mr. David Owens

Yes, and that would create extra cost, which is where the problem arises from a cost-effectiveness point of view. Would it stack up? That said, I do not see why it cannot be looked at.

An Cathaoirleach

Deputy Devlin is next.

Deputy Cormac Devlin

Go raibh maith agat. I welcome Mr. Owens and Mr. Judge and thank them for their attendance. Some of the questions I want to ask may have been touched on, so forgive me if that is the case. Some of my questions relate to the opening statement. How many staff are working in the climate unit in the Department and has that number been increased over the past few years?

Mr. David Owens

There are seven of us now and, hopefully, there will soon be eight. I joined the Department about two and a half years ago. I came from the then Department of Public Expenditure and Reform and the unit was partially in place then. We try to embed and mainstream climate policy into the various strands, whether that be financial services, taxation, the general budget, the overall fiscal stance and so on. That is where our work on the green budgeting is done. That is published as part of the budget documentation. We negotiate in the member state expert group on the taxonomy. We worked on the EU green bond standard. We also look at all of the various climate action plan measures that touch in some way on the Department of Finance and we have to consult with other Departments where they touch something else.

Deputy Cormac Devlin

There is a lot of multidepartmental work. Obviously, there are several strands and threads of climate running through all Departments now. What I am trying to establish is the growth of the unit in the five years since it was set up. When the unit was in its infancy, how many staff worked in it? Was it two or three?

Mr. Seán Judge

Yes, initially there were two staff or fewer but they would not have been solely focused on climate issues. The numbers have really expanded since then.

Deputy Cormac Devlin

Is it fair to say now that the focus and remit of the unit is more climate-oriented and that the staffing level has increased?

Mr. Seán Judge

Yes.

Deputy Cormac Devlin

Mr. Owens spoke about the multilateral nature of much of the unit's work in his opening statement. I was struck by that because it could be argued that at European, international and regional level, climate has become quite the topic. Given the fact that we are about to see the publication of another much-needed biodiversity action plan, what engagement does the unit and the Department have on a transnational basis and how frequent is that?

Mr. David Owens

As I said, we attend European Commission working group meetings. We are consulted by the Department of the Environment, Climate and Communications on many of our files, such as energy efficiency files and so forth. We are consulted by our departmental colleagues on such issues as the energy tax directive and so on. We also attended Conference of the Parties, COP, meetings to look at the international climate finance piece. We work with the Coalition of Finance Ministers for Climate Action. We attend OECD committees, in particular one on carbon mitigation and we attend meetings under the International Monetary Fund, IMF, Article IV, which is are happening now. We are across anything we can be brought into really. Also when there are projects to go forward to the multinational development banks, there may be doubt among desk officers and they would ask us what we think about certain aspects of the projects.

Deputy Cormac Devlin

Okay. I presume the Department is also going to the upcoming COP.

Mr. David Owens

Yes, we are. There is a finance day on 4 December.

Deputy Cormac Devlin

Very good. In light of the publication of the fourth biodiversity action plan, will Mr. Owens give his unit's perspective on the three previous iterations of the action plan, how we achieved, as regards the goals and targets that were set out? Linked with that, and following on from the earlier discussion, how does the unit measure the progress on biodiversity, especially around loss and damage, our protection of certain species, hedgerows and so on? What is his unit's take on the previous three plans as we go into the fourth? It is important for the committee to discuss that.

Mr. David Owens

On the previous three, there was nothing-----

Mr. Seán Judge

I do not think the Department of Finance had a specific action in the previous plans.

Deputy Cormac Devlin

This will be new then.

Mr. David Owens

This is the first time we are trying to mainstream it. Again, I refer to the detailed annex to the Commission delegated regulation on biodiversity which lists pollution prevention and control, protection and restoration of biodiversity ecosystems, determining whether economic activity caused no significant harm and so on. There is huge detail in the European documents and these are law. That is where measurement will come in. Measures are already in place in our well-being framework that look at water quality and so on, but specifically on biodiversity, that is the source.

Deputy Cormac Devlin

It is broad. We will look forward to engaging again in the next little while. It is important. I wish the witnesses luck with their work.

Deputy Richard Bruton

I will come back in on one thing. It seems that some of the big opportunities include river catchments, forestry, peat wetlands and I am sure there are others. Those are off the top of my head. How do they stack up at the moment as regards getting into the sort of framework that will see fast track of investment for them? It seems from what we have heard that there is a great deal of uncertainty around pinning down the exact costs and benefits on an individual project. As a generic type, the State would undoubtedly benefit massively from a huge step up in investment in these areas. It seems we are caught in a slow bicycle race in that we all recognise these things need to be done but we are still saying we do not quite have the tools to drive them along. How do we make the leap? Does it require a political leap of faith that says those models are great, but really we have to decide we will take a political leap and take a chance recognising that some mistakes will be made? How does the Department see it? Those areas seem to be the areas in which we have failed to make the changes we need to make. There is an opportunity there.

Mr. David Owens

From the Department of Finance's point of view, our tools are financial services regulation, the tax system, and then overall spending limits but not detailed spending, so some of those questions would be for other Departments. The three areas mentioned by the Deputy - river catchment areas, forestry and wetlands – as I outlined in my opening statement, they are all ones where funding has gone, whether from the ISIF, green bond proceeds or recovery and resilience funding, among others. They are all in there and they are probably ones which would have suffered in the past from a cost-benefit analysis. I think there was a quote earlier about €1 giving €38 of benefit but my question would be who gets the €38 of benefit. It is probably not the landowner. Rivers just flow through land. Whoever gains the €38 of benefit has not had to pay very much to the landowner whose land the river runs through. These projects have to battle in the budget and Estimates process with everything else, but regulation is coming. It is not just the reporting and disclosures regulation on the financial services side, there is also the nature restoration regulation coming from Europe which will have a direct effect. I think those three areas the Deputy mentioned capture all of those.

Deputy Richard Bruton

Are they coming fast enough for us to feel confident?

Mr. David Owens

That is an open question.

Deputy Richard Bruton

Essentially, what the citizens' assembly has presented us with, which is no surprise, is that this is a crisis situation. It does sound like those things are quite technical and complicated. As Mr. Owens identifies, when we drill down into a particular catchment, it is difficult to say exactly where the benefits and costs lie, and the risk is that they will want to grind so fine that we will probably be analysing them still in ten years' time. I am attracted to taking a punt on some of the bigger and more obvious areas. The State can hardly lose on doing some of these things at much greater scale than we are now doing them. The question is whether we can create a framework for such a leap of faith, if one likes, so that people such as Mr. Owens can guide us to not make crass mistakes but still take the crisis seriously.

Mr. David Owens

I think the regulation is corralling investment towards these purposes. The question for our sister Department – the Department of Public Expenditure, National Development Plan Delivery and Reform, and for the spending Ministers - is how much they want to allocate to these things and how clearly they see the benefit, whether it is a political benefit, social benefit or environmental benefit. The benefit purely in euro from some of these purposes is not immediately evident. That is critical, but at the same time we can all see that the atmosphere has literally changed in the investment community. Through Skillnet Ireland, the Department of Further and Higher Education, Research, Innovation and Science, spent quite a lot of money educating private sector personnel about sustainable finance, environmental finance, climate finance and how to meet all the requirements that are coming from the European Green Deal disclosures and the sustainable finance reporting directive, etc. That is money very well spent because it also adds to raise the awareness in the financial services community about how important such investments are.

Deputy Richard Bruton

My very last question is whether Mr. Owens sees a role for State agencies. I know there has been a lot of criticism of Coillte and other State boards. It has been said that their mandate is not correct. On the other hand, if we want to see substantial private money coming in under some of these programmes, I cannot see anyone else providing the level of verification and oversight. When Coillte went for a partnership recently there was a huge reaction against bringing in a private sector partner. Is there some way in which we can use the verification capability of State bodies to smooth the path to some of these green investments?

Mr. David Owens

Again, I would think that would be the logical place to start, the State through the commercial semi-State bodies. NewERA guides the State's shareholder representation through all 30 of those commercial semi-State bodies. The ESB has a full taxonomy-line bond now. Coillte is again trying to raise money in order to invest it in a sustainable way. I think Coillte and Bord na Móna has 7% or 8% of the landmass.

To be clear, it cannot be done just by State actors. We must bring in private sector actors. Even our climate action plan targets would involve not only State land being rewetted or restored to nature in some way. That will require other instruments and tools, including European instruments but also potentially domestic ones.

Deputy Cormac Devlin

I want to come in on the issue of the green bonds. There is a lot of competition internationally with regard to the green bonds. Mr. Owens made reference in his statement to the multi-annual financial framework, which is the EU side of the house. With regard to the green bonds themselves, can Mr. Owens talk a little bit about the market that is available in other countries equally doing what we are doing, and how we would be competitive and attractive in that space for people to invest in the green bond?

My other question was on the multilateral development banks, which Mr. Owens touched on in his response to me. He might send a note to the committee on the Department's engagement with the development banks, just for a little bit more in-depth analysis of that, if he would not mind. If he could come back to me on the green bonds, that would be great.

Mr. David Owens

As I said earlier, there is huge investor appetite. The NTMA was surprised that what it tried to raise from the green bond in January of this year was oversubscribed more than ten times. It ended up taking €400 million or €500 million extra. It wanted €3 billion, or that is what it was aiming for. In the end it raised €3.5 billion. There is an extraordinary investor appetite for this. The State is seen as a pretty trusted actor. As I said, we have annual allocation reports which are done by my colleagues on the financing the State side of the Department of Finance, with the Department of Public Expenditure, National Development Plan Delivery and Reform and the NTMA bond desk people. The allocation report is published on the NTMA website every year, and it is extremely detailed. That is what the inventors want to see. In fact, it is also third-party verified by a company called Sustainalytics, which runs the rule over the investments to make sure they do what they say they are doing. For the State, this is a very useful form of funding, and for investment in green purposes, this is also extremely important.

As I said, we have the carbon budget increases, which this Government agreed would all go towards green projects. We have the green bond, and we have EU-tagged for it. Colleagues in the Department of Public Expenditure, National Development Plan Delivery and Reform are going through the budget now and tagging it as being green or otherwise, including a soft taxonomy alignment. They are trying to do some assessment because, as I said, taxonomy is not fully complete, and also they may not always have the data to make calls on some of the measures. I think the overall voted expenditure is more than €90 billion. The green bond might spend €3 billion a year, so that is the bit we would stand up as being green and sustainable at the moment, out of the overall spend. Much of that spend is on pensions, social welfare, health spending and pay but with regard to the bits one can actually stack up on a current basis, they are working on that.

Deputy Cormac Devlin

The Department might send on that note.

Mr. David Owens

We will.

An Cathaoirleach

I will bring the discussion back to something that is very much within the remit of the Department of Finance and speak a bit about the carbon tax, which is hypothecated. I had never heard that word before the 2020 programme for Government negotiations. The receipts are set aside or ring-fenced, politically at least, for retrofitting, social welfare measures and agri-environment schemes aimed at delivering biodiversity improvement. I do not wish to push Mr. Owens into a political space but is he able to comment on the importance of the revenue accruing from the carbon tax vis-à-vis the benefit to biodiversity that is being delivered and that will be delivered as the tax is increased towards the end of the decade?

Mr. David Owens

Again, the Department of Finance tends not to be super keen on hypothecated tax revenue. It is an additional loop and, somewhat like the small savings green bond, it is expensive to do. In international fora such as the Coalition of Finance Ministers for Climate Action, we have pointed to the carbon tax and how businesses like it because it is understood and it is programmed out to 2030. It can therefore be factored into businesses' decisions, the dreaded net present value, NPV, calculations and so on. The fact that it is hypothecated and clearly goes towards things such as the just transition, which means the Department of Social Protection gets quite a big allocation from it, is a defence of sorts for increasing a tax at a time of cost-of-living and energy issues. I will answer the question in that way.

An Cathaoirleach

It is therefore very beneficial. Has the Department published anything with respect to the biodiversity impact of that segment of the carbon tax revenues? If not, would it consider doing so?

Mr. David Owens

Again, the Department of Public Expenditure, National Development Plan Delivery and Reform deals with the use of carbon tax revenues as part of the budget.

An Cathaoirleach

It is a matter for that Department's side. The Department of Finance just collects the money.

Mr. David Owens

I do not want to ventriloquise for them here but there is ACRES.

An Cathaoirleach

I do not want Mr. Owens to speak for that Department but there may also be a role for the Department of Finance because it collects the money. I suggest that it is important for the Department that collects the money to look at the outcomes.

Mr. David Owens

That is fair.

An Cathaoirleach

If the Department could take that on board, it would be good to see an official analysis. I see Deputy Bruton returning. He probably has more questions. If not, we are probably at the end of the session. We are just past 2 p.m. and it has been a very long session, albeit a very interesting one. There is a great deal for us to take away from this and think about as we go into the consideration of the citizens' assembly's report. I very much value the witnesses' input and expertise. We all very much appreciate the candour of their answers. I also thank the members for their engagement. As in previous sessions, their questions were very pointed, as they need to be if we are to do justice to this citizens' assembly report. It is time for lunch so I will adjourn the meeting. The committee will have a private meeting at 3.30 p.m.

The joint committee adjourned at 2.04 p.m. until 11 a.m. on Tuesday, 7 November 2023.