Title: Policies to achieve a Sustainable Society Reducing Greenhouse Gas Emissions and Stimulating the Gree
1Policies to achieve a Sustainable Society -
Reducing Greenhouse Gas Emissions and Stimulating
the Green Economy
- Lisa Ryan
- Research Director
Renewable Energy Summit 24th March 2009
2Outline of Presentation
- Comhar SDC who we are and what we do
- Linking climate change and economic challenges
- Building the Smart Economy
- Carbon tax
- Lessons learned and Comhar SDC proposals
- Revenue Use
- Cap and Share
- Conclusions
3Comhar SDC Who we are
- Established by government in 1999 building on
experience of social partnership - Mandate from Minister for Environment
- Independent chairman and 25 members representing
stakeholders from 5 pillars - Environmental
- Community
- Economic
- Professional/ academic
- State
4Comhar SDC How we operate
- Recent recommendations
- December 2008 Recommendations on Cap and Share
- October 2008 Recommendations on Budget 2009
- September 2008 Recommendations on Local
Government Reform - June 2008 Biodiversity Forum recommendations
on 2nd National Biodiversity Plan - May 2008 Recommendations on Sustainable
Transport Action Plan - September 2007 Recommendations on Sustainable
Development Strategy
5Key Presentation Messages
- Hugely demanding legally binding obligations for
energy and climate change for 2020. - 4-year window of sharp economic decline to make
the transition from conventional to
innovation-led green economy. - Three key elements in this transition
- Get the price signals right
- Get the other policies working in the same
direction as the price signals - Use this window to radically and permanently
reduce fuel poverty - Key objective should be to be a leader in Europe
in green tech and green collar jobs by 2020,
convert the challenge into an opportunity.
6Irish GHG Emissions Projections
EPA 2009
7Climate change policy drivers
- 23rd January 2008 European Climate Change and
Energy Package - The mainstay of the new policy is a core energy
objective for Europe that the EU should reduce
greenhouse gas emissions by 20 by 2020. - Separate Member State targets for non-ETS
sectors. Ireland 20 reduction by 2020
transport, agriculture, residential, industry
main sectors.
Non-ETS emissions share With additional measures
2020 (EPA 2009)
8Transition to Green Economy
- Short breathing space to make the transition.
Over the 2010-12 period, sharp economic decline
will result in falling emissions, energy and
carbon prices. - Economic decline - new ESRI forecast 7 fall in
GNP 2007-2010 - means that up to 2010-12 - Falling emissions may mean that the Kyoto
target of 62.8 million tonnes of CO2e will be
nearly met and therefore less payout to buy
allowances Exchequer savings dividend - Falling energy prices build up of stocks of
natural gas, oil, coal - Falling CO2 allowance prices in the European
Union Emissions Trading Scheme (EU ETS), and
associated fall in project-based allowance prices
(CERs).
9The Green New Deal (GND) idea
- Three principal objectives
- Revive the world economy, create employment
opportunities and protect vulnerable groups. - Reduce carbon dependency, ecosystem degradation
and water scarcity. - Further the Millennium Development Goal of ending
extreme world poverty by 2025. - (UNEP report 2009)
10Context for Green New Deal idea
- Global
- July 2008 - New Economics Foundation report
- Theme for Barack Obama presidential campaign
- September 2008 Worldwatch Institute Green Jobs
Towards Decent Work in a Sustainable, Low-Carbon
World - Jan 2009 World Economic Forum Green Investing -
Towards a Clean Energy Infrastructure - February 2009 UNEP report A Global Green New
Deal - Ireland
- Oct 2008 Forfas Report on Environmental Goods and
Services - December 2008 Government Report Building
Irelands Smart Economy A Framework for
Sustainable Economic Renewal
11Building the Smart Economy ReportAction Areas
- Securing the Enterprise Economy and improving
competitiveness investments in infrastructure,
improving public finances, taxes, reducing admin
burden for businesses, retraining people,
agrifood sector, and international financial
services sector. - Building the Ideas Economy innovation fund for
SMEs, taxation for RD and startups, RD funds, - Enhancing the Environment and Securing Energy
Supplies increased renewable electricity (40
in 2020), smart meters, installation of
insulation in 25,000 houses, STTAP, carbon tax,
action plan on green enterprise. - Investing in Critical Infrastructure STTAP,
broadband and energy/electricity, Dublin airport,
NDP priorities, DTA, NSS review, rural
development programme. - Efficient and Effective Public Services and Smart
Regulation procurement centralised in some
areas, special group on public service numbers
report in June, system of Regulatory Impact
Assessment.
12Forfas Report (Oct 2008) on Environmental Goods
and Services
- Potential areas of opportunity
- Renewable Energy
- Efficient energy use and management (including
eco-construction) - Waste management, recovery and recycling
- Water and wastewater treatment (largest subsector
in EGS) - Environmental consulting and services
13Three elements to transition process
- Get the price signals right the time to do it
is now when energy prices generally are in
decline. - Get other policies working in the same direction
as the price signals. - Progress and gaps
- Green purchasing no programme yet
- All direct State investment needs to have a focus
on progressing energy efficiency, greenhouse gas
reduction, innovation, and support for green
jobs. - Information Building Energy Efficiency (BER)
and time of day metering a good start but
information that is relevant, accurate and timely
needs to be pervasive - Research and development - crucial for
competitiveness because innovation is the way to
stay ahead. Funding mechanisms being put in place
Science Foundation Ireland, Programme for
Research in Third Level Education 5 etc. but
accelerated action needed to link enterprise to
innovation - Regulations that require high energy efficiency
and low environmental impact. New home
regulations a good start, but challenge lies in
retrofit. - Subsidies every subsidy and grant should have
energy and carbon efficiency as conditionality.
Warmer homes a good start. - Use this window to radically and permanently
reduce fuel poverty - Poor are vulnerable to high energy and carbon
prices. Dedicate a share of carbon revenues to
achieve this objective, mostly in form of
investment rather than income transfer - Comhar SDC working in all of these areas, but
focus of this presentation is on getting the
prices right.
14Market-based policy instruments
- Environmental policy traditionally based on
command and control-style regulation - Market-based instruments (MBI) correct market
failure by creating a price signal (Carbon tax,
ETS, road pricing, cap and share). This sends a
message to - Businesses that there is return on investment in
energy-saving activities - Consumers to purchase green (energy-saving, best
in class, less wasteful) products, - Investors to make long-term investments in green
businesses and jobs, - Policymakers (local and national) that climate
change programmes can raise revenue and will save
money in the long-run. - MBIs improve environmental performance a least
cost - Opportunity exists to invest revenue in green
economy
15Fiscal instruments really work
- Irish vehicle taxes example
- Change from engine size to CO2 emissions based
system from July 1st 2008. - Preliminary data shows significant change from
higher to lower CO2 emitting vehicles ?
successful.
16Irish vehicle taxes
Motor and VRT taxes a function of car CO2
emissions since 1st July 2008.
17New car sales in Ireland 2008
18Irish vehicle sales breakdown 2000-2008
Source Energy in Ireland (EPSSU SEI 2008)
19Carbon tax Lessons learned from 2003Perceived
barriers to Carbon tax
- Most of industry is already part of the EU ETS
and carbon taxation would lead to double
taxation - Reduction in industry competitiveness
- Not effective in terms of CO2 emissions reduced
while energy prices have risen over the past
years, energy consumption also rose - Issue of fuel poverty among low income
households - Inequitable burden on rural dwellers due to high
price of transport fuels.
20Carbon tax in Ireland post-2007
- The Programme for Government agreed in July 2007
states that - Appropriate fiscal instruments, including a
carbon levy, will be phased in on a
revenue-neutral basis over the lifetime of this
Government. - Commission on Taxation established in Feb 2008 to
review the structure, efficiency and
appropriateness of the Irish taxation system. The
terms of reference for the Commission are - To introduce measures to further lower carbon
emissions and to phase in on a revenue neutral
basis appropriate fiscal measures including a
carbon levy over the lifetime of the Government.
- The Commission is invited to consider the
consider the structure of the taxation system and
specifically to - Investigate fiscal measures to protect and
enhance the environment including the
introduction of a carbon tax.
21Comhar SDC Carbon Tax 2010 Proposals
- Scope limit to non-ETS sectors (really
transport, residential, small industry, services
sectors) - Tax level set equivalent to ETS futures price
- Timing phase-in beginning immediately
- Potential direct emissions reduction 1
- Further related reductions expected for
announcement effect, reinvestment in further
energy-saving measures - Recycle carbon tax revenue in targeted manner.
22Modelling results (2008)
23Carbon Tax Revenue use
- Estimated annual revenue at forward ETS price of
10-25 per t CO2 between 250-680 million in
2010 - Potential of carbon tax to reduce emissions and
encourage sustainable economic growth by using
revenue to invest in Green New Deal package - Reduces public mistrust of government use of
funds - Necessary to counter regressivity of carbon tax
- Fuel poverty exists with no programmes in many
areas - Energy-saving schemes needed but reduced funds
available.
24Carbon Tax Revenue use proposals
- Proposal to use revenue to
- Reduce labour taxes and compensate low income
groups (40-47) - Invest in energy-saving activities (30)
- Voluntary energy agreement rewards
- Public good activities, i.e. public transport,
rural transport schemes, - Environmental Goods and Services
- Research and development.
- Eliminate fuel poverty (15-20).
25Cap and share scheme (1)
- Alternative scheme for residential and transport
sectors, particularly interesting at more
ambitious emissions reduction targets. - Operation
- Government sets cap on fossil fuel importer
emissions - Total cap divided by no. of Irish households and
allowance certificate awarded to each - Fuel importers pass through additional costs to
consumers who reduce energy consumption to reduce
their exposure to higher prices - Households cash in certificates at market prices
at banks and are compensated for rising prices. - Quite similar to a carbon tax with lump sum
compensation to households.
26Cap and Share scheme (2)
- Advantages
- Public engagement aids acceptability
- Lower income households relatively highest gains
- More acceptable than carbon taxes at tighter
emissions limits and resulting carbon prices - Relatively simple to operate compared with many
personal emissions trading schemes. - Weaknesses
- Transaction costs potentially high
- Utility losses through opportunity costs to
reduce other distortionary taxes.
27Cap and Share Scheme modelling results
Source Cambridge Econometrics (E3ME model)
28Comhar SDC recommendations Cap and Share scheme
- A combination of a cap and share and carbon tax
schemes should be considered in the medium to
longer term - Fossil fuel usage from households could be
covered by a cap and share scheme - Carbon tax levied on non-ETS businesses revenue
from the carbon tax recycled back to
energy-efficient activities and innovation in
businesses. - Working party needed to make recommendations on
implementation of a cap and share scheme. - Particular attention should be given to
- (i) integration of a cap and share scheme with
other policies, for example in Northern Ireland,
and the resulting impact on fuel tourism - (ii) whether rural dwellers and other vulnerable
groups would require additional compensation and
- (iii) to assess the administrative requirements
and costs of such a scheme. - Cap and Share scheme should be based on the PPS
system and electoral roll, with consideration
given to the treatment of children.
29Next steps for Comhar SDC work
30Key Conclusions
- Significant economic and climate change
challenges present and future - New sources of revenue required to stimulate
long-term sustainable economy - Opportunities for change exist
- Focus on getting
- Price signals
- Policy
- Equity
right
Growth of Green Economy
31Further information
- Lisa.ryan_at_environ.ie
- www.comharsdc.ie