I thank the Chairman and the committee for accommodating a debate on this motion so quickly.
I am seeking the approval of Dáil Éireann to the terms of an authorisation agreement between Ireland and the European Bank for Reconstruction and Development. The proposed agreement will enable completion of a bilateral emissions trading deal with Poland under the bank's multilateral carbon credit fund. Dáil approval for the bilateral deal with Poland was received in 2006 but the possible need for an authorisation agreement with the European Bank for Reconstruction and Development was not envisaged at the time. It is this additional step in the purchasing process that has given rise to the need to revert to Dáil Éireann for further approval.
On foot of a €20 million investment in the multilateral carbon credit fund operated by the European Bank for Reconstruction and Development, in conjunction with the European Investment Bank, Ireland is at an advanced stage of completing a deal to acquire carbon units from Poland. The bilateral deal is being completed in accordance with the international emissions trading mechanism provided for in Article 17 of the Kyoto Protocol and the acquired units will be used for the purposes of compliance with the protocol in the commitment period 2008-12.
Before going any further, it is important to recall the national policy objective of meeting our targets for the purposes of the Kyoto Protocol through domestic measures to reduce greenhouse gas emissions, supplemented as necessary by the purchase of carbon units on the international market. A carbon purchasing programme is not a substitute for domestic action. An over-emphasis on purchased units for compliance purposes in the longer term would undermine the fundamental objective of an early and effective transition to a low-carbon future.
In my carbon budget statement in 2008 I told the House that an approach to Kyoto Protocol compliance based on over-reliance on purchased carbon units would be a millstone which would hold back our economic development and deny us the advantages which would flow from early mover adoption of efficient technology in transport, energy production, agriculture and our homes and workplaces. To sum up on this point, I see Ireland's use of carbon units as a necessary and prudent short-term measure to ensure compliance with the Kyoto Protocol, while domestic measures to underpin transition to a low carbon economy are being developed and given full operational effect.
Government policy on the use of purchased carbon units to supplement domestic emission reductions is set out in the national climate change strategy published in April 2007. The institutional arrangements for purchasing carbon units are set out in Annex 3 to the strategy. Although our investment in the multilateral carbon credit fund, the subject of this debate, pre-dated publication of the national climate change strategy, it anticipated and is in line with the purchasing framework in Annex 3. The decision to invest in the multilateral carbon credit fund arose from the process, in 2006, of obtaining approval from the European Commission for Ireland's second national allocation plan which provides the basis for allocation by the EPA of emissions trading allowances to the Irish installations participating in the EU emissions trading scheme in the current trading period 2008-12.
In considering the proposed plan submitted by the EPA in 2006 the European Commission had concerns about the fact that, while Ireland had signalled its intention to use purchased carbon units to supplement domestic action to ensure compliance for Kyoto Protocol purposes, there was no evidence of actual purchases or arrangements to purchase. Naturally, in looking at the allocation to the sector of the economy covered by the emissions trading scheme, the Commission needed to take a view on the proposed allocation plan in the broader context of overall national policy and compliance with Kyoto Protocol commitments.
The sum of our efforts to reduce greenhouse gas emissions on foot of the cap placed on installations participating in the trading scheme, through policies and measures in other sectors of the economy and the use of purchased carbon units, had to add up to national compliance. Assuring the European Commission on our commitment to compliance through action on all three elements of national policy was key to securing a fair allocation of trading allowances for our installations covered by the EU trading scheme. Failure to secure that fair allocation would have put the Irish companies concerned at a competitive disadvantage in the five-year period 2008-12.
It was in this context that the Government brought forward initiation of the planned purchasing programme and invested in the multilateral carbon credit fund operated by the European Bank for Reconstruction and Development and two carbon funds operated by the World Bank. Elimination of the concerns that existed regarding our commitment to act on the supplementary element of our policy approach to compliance enabled the Commission to approve the proposed plan without imposing a significant adjustment in the proposed allocation to Irish trading companies in lieu of an operationalised national purchasing programme.
In November 2006, the Dáil debated and adopted a motion approving a total investment of €20 million in the multilateral carbon credit fund by way of a contribution agreement with the bank. On the same date, 30 November 2006, the Attorney General's office provided a legal opinion to the bank on the contribution agreement to the effect that all constitutional requirements and legislative provisions were in place for the investment and for an agreement to be signed. The agreement with the bank was finalised in December 2006.
When the investment has already been approved by the Dáil for the purposes of Article 29 of the Constitution, members are possibly wondering why I am now tabling a further motion on the same investment. The reason relates to a change in the handling of the investment and I will come back to this point later in my statement.
Funding the investment in the multilateral carbon credit fund was provided for in a once-off provision of €20 million in the Vote of the Department of the Environment, Heritage and Local Government in 2006.
There are two distinct elements to the multilateral carbon credit fund. The first is a project-based element in which we have invested €5 million. This element of the fund supports projects eligible under either the Kyoto Protocol joint implementation mechanism or the clean development mechanism.
The second element of the fund, in which we have invested €15 million and which is the subject of this motion, was reserved for sovereign parties to the Kyoto Protocol. It was not open to private entities, such as firms participating in the EU emissions trading scheme. The other sovereign party that invested in this element of the fund was Spain.
This element of the multilateral carbon credit fund reserved for sovereign parties is known as the green carbon fund. The proceeds of country-to-country trading of Kyoto Protocol allowances are used to finance climate friendly projects, known as green investment schemes, in the selling country. In the case of the green carbon fund, the selling country is Poland and, as I said at the outset, our bilateral arrangements are at an advanced stage. The bilateral arrangements between Spain and Poland are at a similar advanced stage.
Management of Ireland's investment in both elements of the multilateral carbon credit fund is a matter for my Department, and I am satisfied that the proceeds of these funds are directed towards good, environmentally-sound projects that will deliver verified emission reductions. We have not, and we will not, avail of international emissions trading under Article 17 of the Kyoto Protocol to engage in the purchase of carbon allowances which are not linked to green investment schemes in the selling country. In other words, we have not and we will not buy "hot air".
In December 2008, I signed a non-binding letter of intent with my Polish counterpart which addressed future transactions in Kyoto Protocol allowances, and mutual co-operation to achieve the objectives of the United Nations Framework Convention on Climate Change through international emissions trading by way of a green investment scheme. This was an important step in terms of confirming the commitment of both parties to the Kyoto Protocol and to verification of emission reductions through agreement on an agreed green investment scheme.
Since that development, negotiations involving my Department, the relevant authorities in Poland, the European Bank for Reconstruction and Development, and European Investment Bank have taken place with the objective of reaching agreement on Ireland's €15 million investment in the green carbon fund element of the multilateral carbon credit fund. The aim of these negotiations was to finalise a green investment scheme in Poland and the overall terms of the agreement. As the other sovereign party in the green carbon fund, Spain, and Poland progressed their bilateral arrangements along similar lines, the final negotiations involved all three parties. I am pleased that the negotiations have been successfully concluded and we are now in a position to finalise a mutually beneficial deal with Poland.
The European Bank for Reconstruction and Development has facilitated the deal from the outset and was not expected to be involved other than in a facilitative role. However, the terms worked out in the negotiations over the last year require the bank to make the purchases from Poland on behalf of both Ireland and Spain. For this to happen, the bank requires a formal authorisation agreement to allow it to act on Ireland's behalf and to utilise our €15 million investment to pay for the Polish allowances which we will receive.
Following examination of the documentation by the Attorney General's office, I am advised that the proposed authorisation agreement with the European Bank for Reconstruction and Development constitutes an international agreement for the purpose of Article 29 of the Constitution and Ireland cannot be bound by it without prior Dáil approval. Therefore, notwithstanding approval by Dáil Éireann for the 2006 investment in the multilateral carbon credit fund, this additional step in the purchasing process gives rise to the need for further Dáil approval in order to complete the transaction.
I am now seeking the approval of the Dáil, by way of a motion for the purposes of Article 29 of the Constitution, to the terms of an authorisation agreement between Ireland and the European Bank for Reconstruction and Development. This proposed agreement will allow completion of a mutually beneficial deal which Ireland has pursued with Poland for over three years and which has been successfully concluded. I commend the motion as an important contribution to Ireland's commitment to address global climate change and our responsibilities under the Kyoto Protocol.
