It is a privilege to present the fourth annual carbon budget to the House. Since this annual carbon budgetary process began three years ago, it has continued to evolve, increasing interest and awareness in both the challenges and opportunities of a low-carbon future, and embedding the national climate agenda at the heart of budgetary policy and decision making. Today, I want to take the national climate policy agenda one step further by laying down clear and ambitious plans for how we deal with the challenges of climate change in the future.
That is my key message today. Our success as an economy and as a society in the low-carbon world of tomorrow depends on the preparations, commitment and effort that we make in responding to climate change. Tackling climate change is about putting measures in place, not for the short or even medium term, but for the long term. The future of our economy and society depends on it.
We are now reaping the bitter harvest of the failure in this country to plan. We see the consequences of poor regulation and short-term thinking in our banking, property and finance sectors. In the future, the failure to take measures to tackle climate change now will be judged with the same harshness, as businesses, families and society face enormous costs if we do not take them.
The disappointing outcome to the Copenhagen climate conference last year put the international climate change process, rather than the international agenda, in the spotlight. As I said recently in a statement to the Select Committee on the Environment Heritage and Local Government, the international process under the UN Framework Convention on Climate Change is the right way forward. There is no realistic alternative and the parties to the convention must make every possible effort to underpin it with a powerful global consensus built on partnership and determination.
The positive outcome of this year's climate conference in Cancun is both welcome and encouraging. While progress on the wide range of issues that constitute the agenda was modest by any standard, the process under the convention is back on track. We now look, with renewed confidence, to substantive progress towards agreement on a comprehensive new international climate change treaty at next year's conference in South Africa.
Ireland continues to play a full part in the international agenda, constructively supporting efforts to forge consensus on an effective global response to climate change. We had hoped that a proposed work programme on agriculture and climate change would have been adopted as part of the incremental step taken at this year's conference in Cancun. As well as being an important agenda item for Ireland, the way forward on agriculture is a key concern for many developing countries, including partner countries which we support through our programme of overseas development assistance.
We will continue in our efforts to get a decision on the agriculture work programme adopted as soon as possible.
The positive outcome at the Cancun conference will, I believe, provide confidence within the EU to strengthen its ambition on climate change policy and to move to a 30% greenhouse gas emissions reduction target for 2020. A strategy for completing the transition to a low-carbon EU economy by 2050, which the European Commission will present next spring, will provide a platform for both further progress and a return to EU leadership at a wider international level. Of course, the climate agenda, whether at national, EU or wider international level, cannot be progressed in isolation of other priorities that create demands on our time and resources.
The global economic downturn has created enormous difficulties for many countries, including Ireland. The extent to which it is dominating our attention inevitably means it would be all too easy to overlook or defer our response to climate change. That would be a mistake — a trap into which we must not fall. We must never fail to remind ourselves that climate change is the greatest threat to the people of this world, and that urgent and decisive action is required if we are to avert its worst impacts.
It is now widely recognised that sustainable economic growth is growth that is sustainable in both economic and environmental terms. This is why I believe that, in dealing with the economic downturn, we must not fail to look beyond it. We must plan now to ensure our return to economic growth is environmentally sustainable in terms of carbon intensity, resource efficiency and climate resilience. If we fail to look ahead and to anticipate the inevitable global transition to a low-carbon future, we stand to lose out badly, not just in regard to new opportunities in areas such as green technologies but also in regard to the viability of our current economic sectors.
A recent report on the carbon disclosure project highlighted that nine out of ten of the companies surveyed, including some of the biggest companies in the world, identified significant commercial opportunity arising from the global response to climate change. At the heart of all this is an opportunity to respond to the most pressing priority in people's daily lives today — job creation. Taking the EU's ambitious renewable energy target as just one example, the European Commission estimates that delivering on the 20% renewable energy agenda will involve some €130 billion of investment and create some 700,000 jobs.
We must work to emerge from the current economic downturn as a resource efficient and climate resilient country, and establish ourselves as a re-invented society focused on smart, clean technologies and a high quality of life for all our people. We have made good progress in recent years. Our greenhouse gas emissions have significantly reduced and we are on course to comply with our emissions target for the purposes of the Kyoto Protocol.
Preliminary outturn figures from the Environmental Protection Agency for 2009 signal a real possibility that we will meet our Kyoto target without having to buy further carbon allowances or credits. The suspension of our carbon purchasing programme in 2009 has led to significant savings for the Exchequer, estimated in the order of €170 million over the five year period. Total national greenhouse gas emissions in 2009 fell by 7.9% or 5.36 million tonnes of carbon dioxide equivalent when compared to 2008. As well as the magnitude of the drop, one of the most notable aspects of the 2009 figures is that it was the first time in the 20 years that emission reductions occurred in every sector across the board.
The 20% reduction in emissions from the industry and commercial sector is a hard reflection of the impact of the economic downturn. However, the substantial fall of 10.7% in emissions from the energy sector reflects not only a reduction in economic activity but also the increasing impact of renewable energy. The contribution of renewables such as wind in electricity consumption increased to 14.1% in 2009, up from 11.7% in 2008. This is real progress that will serve us well, not just for Kyoto Protocol compliance purposes but also in the longer term. The challenge now is to underpin a return to economic growth without a corresponding growth in greenhouse gas emissions. We must balance economic and environmental sustainability if we are to establish ourselves as a responsible and successful society.
Looking ahead to the post-Kyoto period, Ireland has a challenging greenhouse gas reduction target under the climate and energy package adopted by the EU in December 2008. Our requirement to achieve a 20% reduction, compared to 2005, in emissions from the sectors of the economy not covered by the EU emissions trading scheme is one of the most stringent targets in the overall package. The recent energy and environment review from the ESRI concludes that Ireland will not be able to achieve this target without having to purchase carbon credits from other EU member states. Its analysis is fair but it is based on its perspective rather than mine. The flexibilities within the package are an important safeguard measure for all member states but hardly progressive in terms of an early and effective transition to a low carbon future. Let us leave the safeguard where it is meant to be at this stage, namely, in the background for use by member states if required.
I want to turn now to the table which follows my statement. Column E of the table demonstrates that we are on course to meet our greenhouse gas emissions reduction target for the purposes of the Kyoto Protocol. Looking beyond the Kyoto Protocol period, columns F, G and H are new and present an overview of projected greenhouse gas emissions to 2020. While the downward projection in gross emissions is welcome, we still have a long way to go in terms of complying with the target to which we are already committed under EU law. Further progress in reducing emissions in the period 2013 to 2020 is now the most immediate priority.
The effect of measures in budget 2011 and the national recovery plan that make further inroads towards the 2020 target are reflected in column G. Two key elements are the extension of the carbon tax over the next three years and other complementary tax measures that will increase the cost of fossil fuels. Price mechanisms are widely acknowledged as the most efficient way to change behaviour; they send clear and strong messages to producers and consumers on the importance of considering the full impact of their choices, including the carbon emissions associated with fossil fuels.
The increase in the carbon tax from €15 per tonne in 2010 to €25 in 2012 and €30 in 2014, which was announced in the national recovery plan, will contribute a saving of 300,000 tonnes CO2 equivalent per year. The plan also commits to a review of vehicle registration and motor tax bands to ensure the scheme continues to reward only the best performing vehicles in the fleet.
The increase in excise duty on petrol and diesel by 4 cent and 2 cent respectively will also encourage motorists to consider the running costs when purchasing new cars. There are already very encouraging signs that this is happening, and 56% of new cars registered since implementation of the new VRT scheme were in bands A and B up to the end of 2009. Combining the new VRT regime with the effects of the scrappage scheme led to an increase in that rate to 77% in the first six months of 2010. The combined impact of these changes to vehicle and fuel tax will be of the order of 150,000 tonnes of CO2 equivalent per year.
The Minister for Finance last week announced the extension of the accelerated capital allowances for purchases of energy efficient equipment for a further three years. He has also indicated that a tax credit will be put in place for households who invest in energy efficiency improvements to their homes. The increase in the standard rate of VAT proposed, while unfortunate but necessary in these times, will have a positive effect on emissions. In a full year, these other measures have the potential to reduce emissions by a further 210,000 tonnes of CO2 equivalent per annum. In spite of the difficult economic and fiscal circumstances in which we find ourselves, these measures represent important incremental progress on greenhouse gas emissions.
Since entering Government, the Green Party has made considerable, real and lasting progress in dealing with climate change. When we arrived in Government in 2007, Ireland was ranked 44th, or close to the bottom, in an international league on action on climate change. This year, for the first time ever, Ireland is in the top 20. In a recent climate policy tracker report by the World Wildlife Fund, Ireland ranked the best in Europe alongside Denmark and Germany in terms of the measures introduced to tackle climate change.
It is worth mentioning a number of these measures, including the re-balancing of motor tax and VRT, which has led to a fundamental shift in the types of cars people are buying in Ireland.
It has made low emission vehicles up to €5,000 cheaper to buy and saves upwards of €300 a year in road tax. We introduced strict new low energy standards for housing, alongside an energy rating system to provide consumers with information when buying or renting a home. We have spent more than €150 million since 2009 on retrofitting homes throughout the country, providing thousands of jobs in the construction sector. Significant sums have been set aside for this purpose this year and next year. We introduced taxation measures to assist companies in the purchase of energy efficient equipment. A new tariff system for renewable energy was also introduced and this has underpinned the increase in renewable energy generation in Ireland.
The introduction of a carbon tax is already established as a fundamental element of national climate change policy. The tax has already been successfully applied to the use of petrol and diesel for transport and to gas and oil for residential use. Application to coal and commercial peat used in the residential sector was announced by the Minister for Finance in last year's budget and is subject to a commencement order. This order is to be triggered with the finalisation of a robust mechanism to counter the sourcing of coal and peat from Northern Ireland, where lower environmental standards apply. Work on the development of this robust mechanism is well advanced and I am confident it will be completed to allow for the application of the tax to solid fuels at the end of the heating season.
As I stated at the outset, I am keen to take a significant step forward on national climate change policy. Global transition to a low-carbon future is both essential and inevitable. As it gains greater political and economic momentum in the coming years, I foresee considerable pressure on developed countries to reduce their greenhouse gas emissions, on both environmental and competitiveness grounds. Failure to act is not an option for any responsible society. Through the introduction of the climate change Bill, we will provide the political leadership necessary to enable Ireland to engage successfully in the resource efficient and climate resilient world of tomorrow. Yesterday, the Government agreed the provisions of the Bill and I expect the full text to be formally approved at its meeting next week. I further expect the Bill to be published next week. It will come before the House next month and I trust that the parties on the Opposition benches which have supported the case for legislation will facilitate its early enactment.
I have invested substantial time in developing the Bill because it is a matter of the greatest importance to get the structure and proposed provisions absolutely right. Our approach must be balanced yet effective, ambitious yet realistic. I am keen to ensure that our legislation will not only enshrine the policies and principles to reflect the core national objective of playing a real and progressive role in the global fight against climate change, but will act as a driver towards achieving a more sustainable future throughout all sectors of society in Ireland as well. Although targets for reducing greenhouse gas emissions are important indicators of our progress, let us not lose sight of the big picture and the long-term vision of where we wish to be. This is a significant and necessary change in our approach to climate change policy. Transition is fundamental such that we need a clear and strong focus on the ultimate objective — a future that is economically and environmentally sustainable — if we are to map out a progressive and successful future for our country.
The Bill is novel and sets a new national priority on transition which will complement other national priorities, such as the health and well-being of all of our people, the competitiveness of our economy and the protection of natural resources for the benefit of future generations. In providing a legislative underpinning for a proactive transition, it presents the people as an informed and progressive society pursuing a smart economy in the truest sense of the term, that is, an economy which is highly productive, competitive, resource-efficient and environmentally sustainable. The Bill is innovative and inspirational and I look forward to a frank and honest public debate when it is published.
The structure of the Bill provides a strong legislative framework for a core objective on transition to a low-carbon, climate-resilient and environmentally sustainable society; a short-term target to reduce greenhouse gas emissions by an average of 2.5% per year by 2020 compared to 2008 emissions; a medium-term target to reduce emissions by 40% by 2030 and a long-term target of 80% by 2050 compared to 1990 emissions; the 2020, 2030 and 2050 targets to act as milestones along the transition pathway; and climate policy objectives and obligations to be integrated into sectoral policy areas and sectoral mitigation and adaptation plans will be required for relevant sectors. A national mitigation plan will set out Government policies and measures in respect of mitigation while a national adaptation plan will set out Government policies and measures in respect of adaptation. An annual transition statement will provide accountability to the Oireachtas in respect of progress towards the transition goal, the targets and the implementation of the national mitigation and adaptation plans and an expert advisory body will advise Ministers and the Government on the functions of the Bill, including national mitigation and adaptation plans and the annual transition statements.