Arthur Cox: Ireland’s Journey to a Sustainable Future

Jul 2020

 At a time when many sectors of the economy are facing an uncertain future, the Irish low carbon economy is enjoying a period of perhaps unprecedented optimism.

This optimism is fuelled justifiably by an extraordinary level of policy ambition in the new Programme for Government – Our Shared Future, which sets policy direction for the next five years, the Climate Action Plan 2019 and the roadmap provided by the European Green Deal.  The legislative framework underpinning this is enshrined in the EU’s Clean Energy Package and at a domestic level implementation will be championed by Minister Eamon Ryan TD, who returns to the energy portfolio with a strong track record of delivering ambitious policy in the climate sphere.

Sustainability at the heart of Government Policy

The centrepiece of the Green New Deal in the Programme for Government is the objective of achieving carbon neutrality by 2050.  For the first time, this puts sustainability and decarbonisation at the heart of Irish Government policy, providing a platform for the transformation of the Irish power system, the Irish economy and Irish society.  Highlights of the Green New Deal include:

  1. Greenhouse Gas Emissions: A commitment to an average 7% annual reduction in greenhouse gas emissions from 2021-2030, up from around 3% in the Climate Action Plan, which equates to a reduction of 51% over the decade. The target of net zero emissions by 2050 is to be enshrined in the Climate Action (Amendment) Bill 2019, previously published to give statutory effect to the core objectives of the Climate Action Plan.  It will include five-year carbon budgets to set binding limits for each sector to deliver reductions in emissions. The intention is to drive policy change across every sector to include development of renewable energy and carbon sinks, electric vehicles, micro-generation, sustainable bio-energy and R&D. The Environmental Protection Agency recently published its Greenhouse Gas Emissions Projections 2019 to 2040.  For Ireland to meet its EU target of reducing emissions by 30% by 2030, full implementation of the Climate Action Plan is required.  However, to keep the global temperature increase to 1.5°C, further action is needed: so the increased ambition evident in the Programme for Government is a very welcome development.
  2. Carbon Tax: Will increase by €7.50 per annum to 2029 and €6.50 in 2030, raising the carbon tax to €100 per tonne. It is proposed that a Climate Action Fund is established using the additional carbon tax revenue of an estimated €9.5 billion over the next ten years.  This will provide funding for social welfare to prevent fuel poverty, a national retrofitting programme, and a REPS-2 programme to encourage and incentivise green and sustainable farming.
  3. Renewables: The Climate Action Plan goal of delivering at least 70% renewable electricity by 2030 is restated, alongside the commitment to hold the first Renewable Energy Support Scheme (“RESS”) auction by the end of 2020 and every year thereafter (including a RESS auction for offshore wind in 2021). Other critical work already in progress is to be accelerated including the Marine Planning and Development Bill, the Celtic Interconnector, the Wind Energy Guidelines, EirGrid’s DS3 Programme, and the roll out of smart meters.  In addition the Programme for Government commits to development of a National Energy Efficiency Action Plan, development of a Solar Energy Strategy, strengthening a policy framework to incentivise electricity storage and interconnection, clustering centres of excellence in development of low-carbon technologies, investing in research into ‘green’ hydrogen and measures that benefit communities such as microgeneration, Sustainable Energy Communities and community benefit funds.
  4. Offshore Wind: The Programme for Government provides for a long-term plan to exploit a potential of at least 30GW of offshore floating wind power on the Atlantic Coast and to position Ireland as a major contributor to pan-European renewable energy generation and transmission. The plan includes a path to achieving 5GW in offshore wind off the Eastern and Southern coasts by 2030, an increase from 3.5GW in the Climate Action Plan.
  5. Decarbonising Energy Production: As part of a move towards carbon neutrality, the Government commits to ending the issue of new licences for the exploration and extraction of gas and to withdraw the Shannon LNG gas import terminal from the EU Projects of Common Interest list. The Government plans to consider the implementation of a carbon price floor in the ETS to support the transition from fossil fuels to renewables.
  6. Retrofitting: A National Retrofitting Plan will aim to retrofit at least 500,000 homes to a B2 energy rating by 2030 and commit to leveraging smart finance of the programme via loan guarantees, the European Investment Bank and the Strategic Banking Corporation of Ireland. The plan seeks to grow the existing retrofit industry tenfold while lowering cost and improving efficiency and productivity.  A National Retrofitting Delivery Body will be designated by the end of 2020, with pilot schemes commencing in 2021.
  7. Public Sector Energy Performance: Public bodies will be subject to a decarbonisation target of at least 50%. The development of policies to ensure greater use of energy performance contracts within the public service will be the focus of a Public Sector Decarbonisation Strategy for 2030, with the Office of Government Procurement to play a key role in centralising the procurement of energy-related investments and services.
  8. Decarbonisation of Transport: There is a particular focus on the decarbonisation of cars and light goods vehicles. The Government plans to legislate to ban the registration of new fossil-fuelled cars and light vehicles and phase out diesel and petrol cars from cities from 2030, review the motor taxation regime for new vehicles to ensure that it adequately captures the harm caused by nitrogen oxide and sulphur oxide emissions, publish an electric vehicle strategy to ensure charging infrastructure stays ahead of demand, require that all new urban buses be electric hybrid or electric, publish a procurement framework for electric vehicles, with the goal of only allowing public sector bodies to purchase low / no-emissions vehicles by 2025, and publish and implement a 10-year low-carbon strategy for the haulage sector.
  9. Ensuring a Just Transition: A Just Transition Plan will be published to identify and prepare for challenges. It will frame the work of a permanent Commission for Just Transition.
  10.  Stress-Testing Financial Institutions: The Government plans to publish regulatory changes to drive climate action and decrease reliance on fossil fuels. This includes developing new stress tests for financial institutions as recommended by the Taskforce on Climate-related Financial Disclosures.  The stress tests will assess the impact of tangible risks on higher temperature scenarios and involvement of the fossil-fuel economy in portfolios.

Climate Governance is required to meet the 2050 Target.  Existing frameworks are flagged including the Climate Action PlanClimate Action Delivery BoardNational Energy and Climate Action Plan, and National Adaptation Framework & Sectoral Adaptation Plans.[1] It is proposed to establish a Climate Action Council under the Climate Action (Amendment) Bill 2019 and a Joint Oireachtas Committee on Climate Action.  There is a commitment to respond to the OECD review of the Environmental Protection Agency and ensure a fit for purpose licensing pollution framework.

On the same day as Budget 2021, the Government will set out a National Economic Plan, an important element of which will be the European Green Deal.  Included will be bringing forward a review of the National Development Plan from 2022, and funding for the Project Ireland 2040 Climate Action Fund and the Disruptive Technologies and Innovation Fund.  This takes place against a wider context of EU-wide support for economic recovery and transition to carbon neutrality.

Delivery of the Green New Deal

Against the background of this new wave of optimism, it is easy to forget how far we have come in a short period of time.  A little over a year ago, REFIT (the predecessor to RESS) had closed for new applications, REFIT extensions were not being granted, RESS was delayed and energy policy was uncertain.  Irish data from Infrastructure Journal reveals that financial close was achieved on an impressive 32 greenfield onshore windfarms between 2016 and 2018, but in 2019 this figure had dropped to only two.

The momentum change since then has been grounded in strong leadership, ambitious policy and a confidence fuelled by substantive progress on implementation.  This provides a salient lesson in what will be required to deliver on these policy outcomes between now and 2030.  A decade is a short time in the context of large scale infrastructure development and so time is of the essence. Achieving transformational change of the energy system over the next decade is, to paraphrase Mark Foley, Group Chief Executive of EirGrid, a game that must be won in the first half.

Perhaps most importantly, what the next few years will require is courage.  We must be brave and be prepared to take difficult and sometimes unpopular decisions. We must acknowledge and accept that there will be short-term cost in delivering transformation change, but these will be more than compensated by long-term gains. We must be prepared to invest now to achieve our objectives over the next decade, whilst being pragmatic about what can be done in the short term. We must resist the urge to administratively dampen market signals, and then justify doing so on the basis of a misguided belief that ignoring price signals keeps costs down for consumers.

The counterpoint of courage is communication and collaboration.  Key to achieving any challenging outcome is endeavouring to ensure that everyone shares and understands a common goal.  The scale of our 2030 ambition means that policy makers, regulators, system operators and industry must work together.  Key stakeholders such as demand customers and communities must be engaged and trust that they are being heard and their views are being taken into account, and the Programme for Government recognises this.  We must create an environment that allows private capital to be accessed efficiently and private sector expertise to be leveraged, not only to deliver renewable generation, but also to deliver the considerable investments in enabling infrastructure such as transmission, interconnection, storage and system services that will be necessary to achieve our renewable objectives.

At the level of practical implementation, the scale of change, innovation and flexibility required to achieve carbon neutrality by 2050 requires a regulatory framework that is transparent and facilitates financeable routes to market.  The Clean Energy Package provides the legislative framework for this and it must be implemented faithfully.  We cannot afford to rationalise failures to make difficult decisions.  Planning guidelines must be consistent with policy goals and developers must be able to move efficiently through regulatory approval processes that are pragmatic, coherent and co-ordinated.  Risk must be allocated to those best able to manage it to support long-term investment and reduce costs to consumers.

We have a domestic policy framework and an EU legislative framework that gives us the opportunity to transform our power system, our economy and our society. Achieving these objectives will not be easy, but the scale of the opportunity is enormous. The question is whether we have the courage and the conviction to seize it.

The authors would like to thank James Ringland for his contribution to this article.

For additional information, please contact the Arthur Cox partners Alex McLeanKaren Killoran, Danielle Conaghan, Matthew Dunn, Associates Nicole Ridge, Dearbhaile O’Brien, or Professional Support Lawyer Katrina Donnelly.

The source of article - https://bit.ly/30D1rtE