Alan Farrell
Ceist:95. Deputy Alan Farrell asked the Minister for Finance to provide an update on his Department’s efforts to support climate action projects; and if he will make a statement on the matter. [4005/24]
Amharc ar fhreagraThursday, 1 February 2024
Ceisteanna (95)
Freagraí scríofa
The Programme for Government lays out a commitment to achieve emissions reduction of 51% by 2030 relative to 2018, with the enactment of the updated Climate Action and Low Carbon Development (Amendment) Act on 23 July 2021 giving statutory force to this reduction, as well as placing on a statutory basis a net zero target for 2050, and establishing a process for adopting a series of five-year carbon budgets and related sectoral emissions ceilings.
Through annual Climate Action Plans, Government has set out a pathway that seeks to deliver on this and to implement the adopted carbon budgets and sectoral emissions ceilings.
My Department is fully committed to supporting the Government’s climate agenda and will continue to contribute positively to the achievement of the Government’s emission reduction targets, including through supporting delivery of Climate Action Plan 2024 as approved in December, subject to public consultation and Strategic Environmental Assessment.
My approach is in line with the Programme for Government which agreed that all Departments should make climate action a core pillar of their new strategies, with the Department of Finance’s Statement of Strategy now including ‘promoting environmentally sustainable economic progress’ as one of the Department’s five strategic goals. Under this priority, the Department’s goal is to develop and promote economic, fiscal and financial policy advice to support the Government’s climate agenda.
As Deputies will know, the taxation system has an important role in supporting our efforts to transition to a low carbon economy and over the past number of years, a number of environmental taxation reform including increases in the carbon tax, and reforms to the vehicle registration tax (VRT) and motor tax regimes have been introduced.
In particular, I see the implementation, through the Finance Act 2020, of the statutory trajectory for increasing the carbon tax to €100 per tonne by 2030 as a central building block of our national decarbonisation strategy. The rate increased to €56.00 per tonne on 11 October 2023 for auto-fuels and will apply to solid and other fuels used in home heating from 1 May 2024.
As Deputies will be aware, since 2020 revenue raised from increases in the carbon tax is also hypothecated – that is it is directly allocated for expenditure on climate action and the Just Transition. The additional revenue raised by increasing carbon tax in steps up to €100 per tonne by 2030 is ring-fenced and used to enable progressivity, transitional changes and the greening of agriculture, and to provide targeted social welfare and other measures to prevent energy poverty.
In support of our retrofitting targets, we have legislated for a new tax deduction of up to €10,000 per property for small-scale landlords who undertake retrofit works while the tenant remains in situ. In support of our renewables targets, I introduced a measure in Finance Act 2023 to reduce the VAT rate on the supply and installation of solar panels for private dwellings to zero from 1 May 2023, and in Budget 2024 I extended this measure to schools with effect from 1 January 2024. Furthermore, Budget 2024 announced a doubling of the tax disregard in respect of personal income received by households who sell residual electricity from micro-generation back to the national grid. In addition, the home energy upgrade loan scheme was developed by my Department in conjunction with the Department of the Environment, Climate and Communications, the Strategic Banking Corporation of Ireland, the Sustainable Energy Authority and the European Investment Fund.
On Budget Day, I also announced the establishment of two significant new funds which will have an important role in financing climate projects: (i) the Future Ireland Fund; and (ii) the Infrastructure, Climate and Nature Fund.
The Future Ireland Fund will be maintained over the longer term with the return on the Fund used to support government expenditure for future generations. This will help to deal with future recognised expenditure pressures including ageing, climate, digitalisation and other fiscal and economic challenges. The Infrastructure, Climate and Nature Fund will help to ensure that the State has resources available in a future downturn to support expenditure through the business cycle. It will have a climate and nature remit worth up to €3.15 billion. The aim of this is primarily to help the achievement of the national carbon budgets and sectoral emissions targets, through the delivery of projects. The Fund is designed to be used where it is clear our climate targets are not being reached.
The Bill to provide for the establishment of these funds is listed as a priority for publication on this term’s Government legislative programme. The Oireachtas Committee for Finance, Public Expenditure and Reform and Taoiseach published its Pre-Legislative Scrutiny Report on the legislation on 25 January 2024. My officials are reviewing the Report and the drafting of the Bill is progressing.
I will also mention the important role of the National Treasury Management Agency, which is a body under the aegis of the Department of Finance, in contributing to the funding of climate projects in tandem to supporting the broader green financing needs of the State. In particular, through its funding and debt management function, the NTMA, on behalf of the State has issued Irish Sovereign Green Bonds (ISGBs) to the value of over €10 billion, with the proceeds allocated against eligible green projects.
The financial services sector also has a pivotal role in facilitating such activities and accelerating the implementation of Ireland’s Climate Action Plans and transition to net zero. For a number of years, Ireland has prioritised developing our sustainable finance sector, as part of our international financial services strategy, Ireland for Finance, and in our engagement at EU level.
At EU level, my Department works to ensure the regulatory framework for sustainable finance is ambitious and transparent while remaining usable for companies, including in relation to the EU taxonomy for sustainable activities, and the sustainable finance disclosures regulation.