Tom Neville
Question:250. Deputy Tom Neville asked the Minister for Communications, Climate Action and Environment his views on a matter (details supplied); and if he will make a statement on the matter. [6516/18]
View answerThursday, 8 February 2018
Questions (250)
Written answers
A carbon credit is a generic term for any tradeable certificate or permit representing the right to emit one tonne of carbon dioxide or greenhouse gas equivalent. In relation to Ireland, the term “carbon credits” may relate to allowances issued under the EU Emission Trading Scheme (ETS) or the EU Effort Sharing Decision.
The EU ETS is a cornerstone of the EU's policy to combat climate change and is a key mechanism for reducing greenhouse gas emissions cost-effectively. It covers emissions from power and heat generation, energy-intensive industry sectors including oil refineries, steel works and production of iron, aluminium, metals, cement, lime, glass, ceramics, pulp, paper, cardboard, acids, bulk organic chemicals and aviation. The EU ETS includes some 11,000 installations with an installed capacity of more than 30MW, with 101 installations currently in Ireland.
The ETS works on the 'cap and trade' principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, companies receive or buy emission allowances, or carbon credits, which they can trade with one another as needed. They can also buy limited amounts of international credits from emissions saving projects in third countries. The limit on the total number of allowances available ensures that they have a value. An ETS installation must surrender enough allowances annually to cover all its emissions, or face penalties. If an installation reduces its emissions, it may retain excess allowances to cover its future needs or sell them to another installation that is short of allowances.
The 2009 Effort Sharing Decision (ESD) established binding annual greenhouse gas emissions targets for EU Member States for the period 2013 to 2020. These targets cover sectors of the economy that fall outside the scope of the ETS, including transport, buildings, agriculture and waste management. For the year 2020 itself, the target set for Ireland is that emissions should be 20% below their level in 2005. Ireland’s target is jointly the most demanding 2020 reduction target allocated to EU Member States under this Decision, which is shared only with Denmark and Luxembourg.
The latest projections of greenhouse gas emissions by the Environmental Protection Agency (April 2017) indicate that emissions from those sectors of the economy covered by Ireland's ESD 2020 targets could be between 4% and 6% below 2005 levels by 2020. The projected shortfall to our targets in 2020 reflects both the constrained investment capacity over the past decade due to the economic crisis, and the extremely challenging nature of the target itself. In fact, it is now accepted that Ireland’s 2020 target was not consistent with what would be achievable on an EU wide cost-effective basis.
The legislative framework governing the EU’s 2020 emissions reductions targets includes a number of flexibility mechanisms to enable Member States to meet their annual emissions targets, including provisions to bank any excess allowances to future years and to trade allowances between Member States. Using banked emissions from the period 2013 to 2015, Ireland is projected to comply with its emissions reduction targets in each of the years 2013 to 2018. However, our cumulative emissions are expected to exceed targets for 2019 and 2020, which will result in a requirement to purchase additional allowances, or carbon credits. While this purchasing requirement is not, at this stage, expected to be significant, further analysis will be required to quantify the likely costs involved, in light of the final amount and price of credits required.
In addition to the two EU legal frameworks described above, carbon credits are also traded under emissions trading frameworks implemented under the auspices of the UN Framework Convention on Climate Change primarily aimed at supporting emissions reductions in developing countries. There are also a number of voluntary or private carbon credit schemes within which carbon credits are issued and traded by individuals or firms who may seek to reduce their greenhouse gas emissions by a real and verifiable amount. Such schemes do not interact with the frameworks described above and I have no plans to introduce such a scheme in Ireland.