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Ireland can’t claim tax of multinationals while disowning their emissions

Europe debates how to reform GDP and economic measures amid dire climate warnings

It was the launch of the European Commission’s Spring Forecast, a key moment in its annual calendar when the European Union executive releases new data and forecasts on how the 27 economies are faring. Paolo Gentiloni told the gathered journalists that the outlook was “much, much better” than had been expected six months ago, but that inflation was due to remain relatively high for the rest of the year.

Then came a question that perhaps he had not been expecting. A journalist from the pan-European news organisation Euractiv asked whether he should be giving the presentation at all.

“This morning President [Ursula] von der Leyen had a speech in parliament saying the conventional economic model we have now is not applicable any more, we cannot go on like this,” the journalist said. “If the commission were to take that seriously I would expect at an economic growth forecast session like this one that we talk about resource consumption, that we talk about emissions. This still feels like a very conventional economic growth session. Why is that, and are there any plans to change that?”

Just that morning the president of the commission had spoken at the Beyond Growth conference, which considered how economic approaches could be adjusted to recognise that infinite growth is not compatible with what the planet can support.

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“A growth model centred on fossil fuels is simply obsolete,” Dr von der Leyen had said, before quoting a famous remark by the late Robert Kennedy that GDP measures everything “except that which makes life worthwhile”.

“Today, on a very fundamental level, we understand Kennedy’s wisdom. That economic growth is not an end in itself,” she said. “That growth must not destroy its own foundations. That growth must serve people and future generations.”

Mr Gentiloni acknowledged that the journalist had posed a good question, adding that he had recently been discussing the issue with the economist Joseph Stiglitz, who has studied how to move beyond GDP as a crude measure of economic growth. He said the commission would increasingly include more social measures and sustainable development goals when it assesses the performance of EU countries.

But GDP as a measure is deeply institutionally embedded, he accepted. At the end of the day, “when we look to the IMF, OECD, European Union forecasting and outlook, most of the attention is on the internationally-recognised indicators that we presented this morning,” he said. “So this is a work in progress.”

Many years of work have gone into creating the data-reporting structures that allow GDP to be assessed and for measurements of it to be internationally comparable. There is no consensus on what could replace it, and policy-makers remain attached to it as a useful tool.

Economists had a point when they argued that President Michael D Higgins had an outdated idea of the discipline, after he accused them last month of being “blinkered to the ecological challenge”. This is what they have been working on. Indeed, how could these questions not be at the forefront in a week in which the World Meteorological Organisation warned that the world would exceed the global warming threshold of 1.5 Celsius above pre-industrial levels in the next five years.

Another dataset released this week underlined the choices and conundrums involved in how alternative measurements are designed, and how Ireland’s current economic approach may fit ill with ecologically-minded measures of success.

Greenhouse gas emissions surged by 12.3 per cent in Ireland in the last quarter of 2022, but fell in the EU as a whole, Eurostat revealed.

The statistics office noted that economic and growth and greenhouse gas emissions had decoupled for most EU countries. Of the 23 countries in which emissions fell, 18 of them “managed to decrease emissions while growing their GDP”.

The Irish Government suggested that the figure for Ireland was distorted by its inclusion of economic activity by multinationals registered in the country.

According to Eurostat, 75 per cent of the rise was from the aviation sector. Ireland is, of course, home to Ryanair, which saw a post-Covid boom last year, as well as being a global hub for aircraft leasing.

How can the Government credibly lay claim to this as Irish economic activity when it comes to tax revenue and flattering GDP figures, but then disown it as a distortion when it’s also counted in Ireland’s greenhouse gas emissions estimate?