OPINION:A carbon tax is only one element in a push towards sustainable and green development, writes FRANK J CONVERY
IN COLM McCarthy's critique of Comhar Sustainable Development Council's Towards a Green New Deal for Ireland(Opinion and Analysis, October 9th), he supports the view of climate change boffin Bill Nordhaus, that "raising the price of carbon is a necessary and sufficient step for tackling global warming".
McCarthy’s analysis would be true if, and only if, the tax was high enough to achieve the necessary reductions, and the tax was universally applied. Neither of these conditions can be met: a carbon tax in Ireland can only be applied to about a third of our greenhouse gas emissions, which is much too low to on its own achieve our legally binding obligations. These realities completely undermine putting a carbon tax forward as the singular solution to global warming, and were addressed in some detail by the Commission on Taxation.
Firstly, the commission points out that the power sector and heavy industry, which account for about 30 per cent of Ireland’s emissions, are in the EU emissions trading scheme, and already face a carbon price (€13.68 per tonne of CO2); it would be inefficient and pose competitive challenges if a carbon tax were to be added to the existing price signal.
Secondly, the carbon tax to be applied to the non-trading sectors (agriculture, residential and commerce, transport, light industry and waste) should, subject to a minimum level, mirror the price in the trading scheme, because to do otherwise would be economically and environmentally inefficient. Thirdly, because of problems of measurement, reporting and verification, the tax cannot be applied to methane and nitrous oxide emissions from agriculture, which account for 40 per cent of greenhouse gas emissions from the non-traded sectors.
Finally, the commission recognised that a tax at this level would not on its own be sufficient to achieve the legally binding 20 per cent reductions to be achieved by 2020.
McCarthy expresses great scepticism about encouraging more wind power, citing an Irish Academy of Engineering report cautioning against more investment in either generation or wind capacity. This deserves to be taken seriously, but so does a study released in January 2009 by the Commission for Energy Regulation and the Utility Regulator Northern Ireland which concluded that “increasing levels of wind generation in most scenarios should result in lower wholesale market prices which will lead to lower retail prices for consumers. A wholesale market price difference of around 15 per cent was noted between the portfolio with the most wind (6,000MW) and the least wind (2,000 MW)”.
Our report also focuses on increasing renewable energy not just renewable electricity. Our energy needs go beyond electricity and our proposals for grid investment are about enabling a more decentralised energy system, not just about maximising wind energy.
And we should, everywhere, be looking for areas where public expenditure and subsidy can be cut, while achieving the greenhouse gas reduction and productivity enhancing objectives. For example, a carbon tax at €20 a tonne will add between 6.4 per cent and 12.9 per cent to the cost of natural gas and coal respectively for household heating. This will make a “pay as you save” package for domestic purposes – whereby increased energy efficiency is funded by the difference between the before and after heating bill – attractive to many households. Subsidies can then be directed exclusively at enhancing fuel efficiency in poor households. This combination could reduce exchequer costs, stimulate the biomass for heat business (the carbon tax in Sweden had exactly this effect) and reduce fuel poverty.
Comhar SDC’s proposals for a Green New Deal do not ignore the state of public finances; rather it is a reaction to them. The Green New Deal is about strategically using limited public finances to leverage private finance in achieving our shared goals. In developing these proposals, we looked to the potential to contribute to tackling climate change, increasing employment, and transitioning to a more resource-efficient economy. Economic cost as the only criteria for a Green New Deal would result in advocating policies that bring short-term gain at longer-term costs.
Ireland will have to meet a range of challenging European targets on energy and climate, as well as biodiversity, at a time when people’s main concern is the economy. We must change our ways: the choice is whether we do so strategically to gain maximum economic, social and environmental benefits or wait until the 11th hour, and meet our obligations in a reactive way that costs more and delivers fewer benefits.
Far from being a recipe for fudge and confusion and “at no apparent cost to the public finances”, Comhar SDC’s proposals for a Green New Deal clearly state the level of stimulus required. The document – which has been developed through a consultation process involving business, academics, and environmental interests – recommends that the Government commits 2 per cent of our GDP to green stimulus measures over the next three years as a mechanism to create jobs and reduce our carbon emissions.
Comhar SDC’s document is the first in a programme of work on the Green New Deal and subsequent analysis is being undertaken to quantify the costs and benefits of many of the ideas in more detail. It was never meant to have all the answers.
One of Comhar’s roles is to advance ideas and stimulate debate on sustainable development. The published proposals were designed to do exactly that and make a constructive contribution to the debate on Ireland’s future that goes beyond Nama.
Many countries, notably China and Korea, but also some in Europe and the US, are acting on the assumption that the next wave of economic development will be focused on innovation-led businesses that reduce dependence on fossil fuels and reduce greenhouse gas emissions significantly. We need to think through the implications of this proposition for Ireland and then act accordingly. Comhar SDC’s proposals are about beginning to find our way in this emerging world.
The first step is to avoid engaging in superficial fantasies that are irrelevant to the realities of our position.
Prof Frank Convery is chairman of Comhar Sustainable Development Council, director of the Earth Systems Institute of UCD and a member of the Commission on Taxation