Dáil Éireann Debate, Tuesday - 20 November 2018
188. Deputy Thomas Pringle asked the Minister for Public Expenditure and Reform if he will require all projects under the NDP to be appraised using a shadow price of carbon in view of the fact that the current EU Emissions Trading System price of nearly €20 may serve as a guide to assessing the long-term climate impacts of NDP investments. [48146/18]
View answerThe appraisal requirements for public expenditure projects and programmes are set out in the Public Spending Code. The Public Spending Code is the set of rules, procedures, and guidance to ensure Value for Money in public expenditure across the Irish Public Service. All relevant guidance material and requirements are presented together, through a unified web-portal at https://publicspendingcode.per.gov.ie/ Exchequer funded capital projects under the National Development Plan must be appraised in line with the requirements set out in the Public Spending Code.
The Public Spending Code stipulates that every spending proposal should be appraised carefully but the resources spent on appraisal should be commensurate with the cost of the projects or expenditure proposals. Projects over €5 million should be subjected to an economic appraisal. For projects from €5 million to €20 million, this should take the form of a Multi-Criteria Analysis and projects over €20 million should be subjected to a Cost Benefit Analysis or Cost Effectiveness Analysis. Section E of the Public Spending Code sets out the key technical and parameter values for conducting economic appraisals including the shadow price of carbon.
Shadow prices are used in appraisal where the use of market prices to value the cost of project inputs and outcomes does not reflect opportunity costs due to market failures. The current guidance on how to apply the shadow price of carbon in economic appraisal of projects can be found in Section E5 of the Public Spending Code.
The Public Spending Code is updated from time to time to ensure that it continues to reflect current best practice. It is currently being reviewed. As part of this review, a research paper on the central appraisal technical parameters, i.e. the discount rate, time horizon, shadow price of public funds and shadow price of labour was published in October 2018.
A public consultation on the shadow price of carbon was also published on 6th November 2018 as part of the current review. The consultation presents the results of the Department of Public Expenditure and Reform’s review of the guidance on public expenditure appraisal to ensure its suitability to capture key costs and benefits of climate measures as committed to under the National Mitigation Plan.
The Department’s review concluded that the model currently in use for pricing carbon in the Public Spending Code is outdated. A new model has been proposed that values future greenhouse gas emissions according to a shadow price of carbon that is based on the estimated marginal cost that will be faced by society in achieving Ireland’s legally binding 2030 greenhouse gas emissions target.
The closing date for this consultation paper is 14th December 2018. Subject to the views received in this process, it is intended that the revised Public Spending Code will apply to all economic appraisals conducted from early 2019 onwards.
