Government spending supports €2bn of potentially climate harmful activity, study finds

The Government will spend almost €2 billion on “potentially harmful climate supports” this year, according to a study by the Department of Public Expenditure.

The research, published alongside the latest batch of spending review papers, examined the impact of voted expenditure, the largest part of Government spending, covering areas such as health, social protection and education as well as funding for state agencies such as Enterprise Ireland, IDA Ireland and Bord Bia.

It concluded that the Irish exchequer will this year support approximately €1.99 billion of activity that potentially increases greenhouse gas emissions.

The single largest component, amounting to €649 million, is related to spending on the Temporary Business Energy Support Scheme (TBESS), introduced last year by the Government to assist businesses with the escalating cost of energy, as it incentivised energy use.

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Researchers, however, cautioned that because the study is forward-looking, budgets in certain areas such as the TBESS, may not be fully spent.

Another area of the potentially climate-damaging activity related to spending on the fuel allowance scheme and the household benefits package. The two schemes have a combined budget for 2023 of just under €337 million.

“Despite the positive social impact of the fuel allowance, it is considered to represent a support towards fossil fuel use,” the study noted.

The entire budgets of the IDA (€238 million), Enterprise Ireland (€220 million) and the €55 million grant to Bord Bia were also included.

“In several instances, not all of the expenditure included in a subhead is potentially climate harmful, but the full subhead is included on the basis that a material portion of the spending constitutes potentially climate harmful expenditure,” the study noted.

“For example, all expenditure by key State agencies such as EI [Enterprise Ireland], IDA, Tourism Ireland and Bord Bia is included. Since the primary purpose of these agencies is to promote the growth of their respective sectors, it is difficult to conclude anything but that this expenditure will lead to a net growth in greenhouse gas emissions,” it said.

While in certain instances, sectoral spending may increase efficiencies and reduce the level of emissions associated with a given activity, the onus was on Government departments to prove this was the case, the study also noted.

Jet kerosene

Ongoing Covid supports of €37 million to regional airports, which are still affected by the lingering effects of the pandemic, were also included.

The focus of the department’s study was solely on direct spending by Government and not on indirect subsidies given to consumers and businesses, which may also result in climate harmful outcomes.

A separate study by the Central Statistics Office found that Government provided €2.2 billion in subsidies to the fossil fuel industry in 2020, the single largest portion of which was the excise duty exemption for jet kerosene used for domestic and international commercial aviation.

The agency estimated that the amount of revenue foregone in 2020 on jet kerosene due to the tax exemption was €234 million. This compares with €634 million in 2019, before the pandemic.