Dáil Éireann Debate, Thursday - 30 March 2023
108. Deputy Darren O'Rourke asked the Minister for the Environment, Climate and Communications if he will report on the analysis that has been carried by his Department on the purchasing of carbon credits; and if he will make a statement on the matter. [16020/23]
View answerAs a member of the EU, Ireland has annual legally binding emissions reduction targets to meet. The EU legislative framework provides for several compliance options beyond direct emissions reductions to enable Member States to achieve their targets as efficiently and effectively as possible. This includes options to bank, borrow, purchase and trade carbon credits, also referred to as Annual Emission Allocation (AEA) units.
For compliance under the EU Effort Sharing Decision (ESD), 2013 to 2020, Ireland has used both international credits and AEAs for compliance. As mandated by the Government, direct purchases of credits on international markets were carried out by the NTMA. Such purchases were made on instruction from the Minister and based on the agency’s analysis of prevailing market conditions. As AEAs may only be obtained directly from other EU Member States, my Department, following Government approval, entered negotiations on behalf of Ireland with several Member States for the purchase of AEAs for compliance with our 2020 targets. Following analysis of all offers received, based on a number of criteria, including total cost and the use of funds for Climate Action, Ireland entered a bilateral agreement with Slovakia to obtain all required AEAs.
The ESD is succeeded by the Effort Sharing Regulation (ESR) for the period 2021 to 2030. The compliance architecture of the ESR is somewhat different from that of the ESD; for example, while the trade of AEAs between Member States remains an option, international carbon credits/externally generated allowances cannot be used for compliance. It is too soon to determine definitively the costs, if any, of purchasing allowances as a compliance option under the ESR. This will be determined largely by the availability of surplus AEA units from other Member States and the unit-price of available AEA units.
Spending Review 2023: Estimating the Potential Cost of Compliance with 2030 Climate & Energy Targets, published in February 2023, was prepared by officials from my Department and from the Department of Public Expenditure, NDP Delivery and Reform, as a first step at estimating the cost of compliance with EU climate targets under the ESR. The paper outlines the proposed approach to estimating the potential costs of compliance on an annual basis out to 2030, in order to present potential implications if Ireland fails to make sufficient progress towards its targets and in implementing the new Climate Action Plan 2023. However, the lack of an existing market for the trade of AEAs or any prior data on purchases under the ESR, precludes precise projections at this point.
My officials will continue to work closely with the Department of Public Expenditure, NDP Delivery and Reform to keep Government abreast of any developments on the fiscal risks associated with any failure to reach climate targets and to ensure we are achieving the best possible value for the Irish taxpayer.
All further insights regarding the availability and price of AEAs, gained from annual emissions reviews and future trades of AEAs, will be integrated into Ireland’s compliance strategy as they become available.
