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Green giant

Green giant

Ambitious climate law plots new course



The Climate Action and Low Carbon Development (Amendment) Act is set to have a massive impact on Ireland and its economy. Ronan O’Grady reduces, reuses, and recycles.

In July, the Climate Action and Low Carbon Development (Amendment) Act 2021 was signed into law. The act will commit the Government to moving to a climate-resilient and climate-neutral economy by the end of 2050.

The legislation will have far-reaching consequences for every section of the economy, across local authorities and, ultimately, all communities throughout the country, including businesses and individual consumers.

Green giant

Green giant

One of the most significant parts of the act is the proposed introduction of carbon budgets, which will become just as important as the annual fiscal budget and will represent the total amount of greenhouse gases (GHG) that may be emitted in the State during the budget period, measured in tonnes of carbon-dioxide equivalent.

The Minister for the Environment will also be responsible for setting the emissions ceiling for 40 different sectors for the five-year period within the limits of the carbon budget. A strengthened Climate Change Advisory Council (CCAC) will propose the carbon budget to the Government, which must draw up a new climate action plan setting out how cuts will be achieved.

Policy context

Ireland’s policy response to climate change is tied to our European and international commitments to reduce GHG emissions. The main Irish climate-action laws and policies are provided for under the:

The principal act

The Climate Action and Low Carbon Development Act 2015 (the principal act) set national climate policy on a statutory footing for the first time in Ireland, with the target of pursuing the transition to a low-carbon, climate-resilient, and environmentally sustainable economy by 2050.

However, a major criticism was the act’s lack of specific GHG emissions targets and, in July 2020, the Supreme Court delivered a seminal decision striking down the National Mitigation Plan in Friends of the Irish Environment v The Government of Ireland & Others, as it did not contain the specificity required for appropriate transparency in order to comply with the principal act.

To address these concerns, the draft General Scheme of the Climate Action (Amendment) Bill 2019 was published on 6 January 2020. In June 2020, a new Programme for Government was announced, declaring its commitment to an average reduction of 7% in overall GHGs from 2021-2030 (a 51% reduction over the decade) and to achieving net zero emissions by 2050.

These actions followed swiftly on from Ireland’s declaration of a climate emergency in May 2019. Additional momentum was provided by the EU’s European Green Deal, announced in December 2019, and will surely now intensify as a result of the code-red warning from the United Nations (IPCC) that climate-change effects are now “widespread, rapid and intensifying”, according to their recently released report ahead of the COP26 climate summit in Glasgow in November 2021, in which global efforts to accelerate climate action will be addressed over a two-week period.

The draft Climate Action and Low Carbon Development (Amendment) Bill 2020 was published on 7 October 2020, with the final more ambitious evolution of the bill, the Climate Action and Low Carbon Development (Amendment) Bill 2021 published on 23 March 2021.

The amended bill reflected the Oireachtas Joint Committee on Climate Action’s efforts (which included 78 recommendations) to tackle some of its perceived weaknesses, particularly the crucial redrafting of the National Climate Objective itself to include the word ‘achieve’. 

The bill finally passed through both houses of the Oireachtas on 16 July 2021 after some last-minute amendments in the Seanad, principally relating to giving the minister “the ability, through regulation, to designate how the carbon budgets are accounted for by an ‘evolving methodology’ applied to sequestration of carbon on farms achieved through afforestation, soils, hedgerows and re-wetting peatlands”. This was seen as a necessary concession to farmers on how carbon is accounted for in agriculture.

Main provisions

The 2021 act’s key provision requires the Government to “pursue and achieve the transition to a climate resilient and climate-neutral economy by the end of 2050” [emphasis added], with the aim of reducing the extent of further global warming. This obligation is called the ‘National 2050 Climate Objective’ and replaces the principal act’s ‘National Transition Objective’.

It amends the principal act and provides a framework to reduce GHGs in the following way:

  • Section 5 establishes an objective of climate neutrality by 2050,
  • Section 9 sets an interim target of a 51% reduction in GHG emissions by 2030, relative to a baseline of 2018,
  • Section 6 provides a framework for the development of enabling plans and strategies to reach 2030 and 2050 targets through:
    a) Annual climate action plans,
    b) Five-yearly, long-term, climate-action strategies,
    c) Five-yearly carbon budgets,
    d) Sectoral emission ceilings, and a
    e) National adaptation framework,
  • Section 10 strengthens the role of the CCAC, including its functions and membership,
  • Section 16 requires all local authorities to prepare climate action plans, to be updated at least every five years (and which are to be considered when making development plans under the Planning and Development Act 2000),
  • Section 15 provides a stronger oversight role on climate reporting for the Oireachtas through committee.

Notable omissions from the act relate to a proposed ban on the sale of new (and the importation of) petrol and diesel vehicles by 2030 (which was included in the 2019general scheme of the bill) and a ban on the importation of fracked gas and on liquified natural gas (LNG) terminals.

New policy instruments

Carbon budgets. Five-year carbon budgets (starting in 2021) will be proposed by the CCAC, finalised by the minister, and approved by the Government. A ‘carbon-budget programme’ will ensure a 15-year perspective by providing visibility at any given time on three successive budget targets.

After a carbon budget is approved, sectoral emissions ceilings will be determined by the Government – based on EPA emissions inventories, the carbon budget programme, and the 2021 Climate Action Plan. Any excess emissions will be carried forward to the next budget period, which will be reduced accordingly.

Strategic and planning framework. The act will require the minister (or in the case of the sectoral adaptation plan, each of the relevant ministers) to submit to Government for approval:

  • Annual revisions of the Climate Action Plan, which will be the road maps to enable the Government to pursue the National 2050 Climate Objective,
  • Long-term climate-action strategies for carbon neutrality will be prepared at least once every five years, and will outline, over a minimum 30-year period, the range of opportunities and transition pathways towards the National Climate Objective,
  • National adaptation frameworks will focus on reducing vulnerability of the State to the negative effects of climate change, and availing of any positive impacts,
  • Sectoral adaptation plans to facilitate adaptation to the effects of climate change in the sector(s) concerned.

Limitation of liability. Under section 4, the act does not impose financial penalties on any sector for failure to comply with the provisions of the act. All other remedies are still available, and the obligations imposed by the principal act remain justiciable before the courts (as confirmed by the FIE Supreme Court case).

If the Government or any public body fails to deliver on its required obligations, the courts may be asked to compel them to act.

International developments

A significant new policy proposal (‘FIT for 55’) was announced in July 2021 by the European Commission, to accelerate the transition in sectors where decarbonisation is moving too slowly (primarily the energy, transport, buildings, and agriculture sectors).

It includes a combination of stricter regulation and emissions standards for industry, carbon pricing and taxes, and rules to promote investment in low-carbon fuels, technologies, and infrastructure.

The 12 legislative proposals include amendments to existing measures (renewable energy, energy efficiency, carbon market, energy taxation, climate-effort sharing between member states, land use and forestry, and vehicle-emission standards) as well as new ones (such as, the Carbon Border Adjustment Mechanism (CBAM) and the Emissions Trading System (ETS) for transport and buildings).

Of all of these, carbon pricing (either through the ETS or carbon levies) will be the most important and controversial aspect of the package – to be debated in the European Parliament over the next two years – and one that was also embraced as a key policy driver for reducing carbon emissions by the G20 at their recent summit in Venice.

The package is likely to rely on further integration of energy markets across Europe, making energy-market integration a fundamental aspect of Europe’s transition efforts. Energy interdependency simply means meeting different energy needs across the EU member states in a coordinated way. This would bring significant benefits, such as maintaining security of supply at a lower cost.

This aspect of the package will likely become even more central in the future, as Europe needs to scale up renewables and rely on electrification pathways to decarbonise significant parts of the economy that are large emitters (such as heating and transport). Hence, the importance of a more integrated power grid across Europe, operated efficiently and securely.

Further evidence of the major global shift in the energy paradigm came from the International Energy Agency (IEA) (traditionally a more conservative organisation in their views of the rate of change required to mitigate the effects of climate change) in their Net Zero by 2050 report published earlier this year, warning that: “Achieving net-zero emissions by 2050 will require nothing short of the complete transformation of the global energy system … in how energy is produced, transported and used globally.”

The IEA’s reports are critically important, as their recommendations are relied on by many governments, businesses, and other institutions as the ‘how-to-guide’ for many of their energy-related decisions, actions, and investments.

The report reduces the previous target for net zero emissions by 20 years and signals a radical transformation in the IEA’s ambition that would see renewables overtake coal by 2026, passing oil and gas by 2030, and providing two-thirds of the global energy supply and almost 90% of electricity generation by 2050.

If the European Green Deal and the ‘Fit for 55’ package are the roadmap and battle plan for achieving the ‘net zero’ ambition, then the Sustainable Finance Package (taxonomy regulation, sustainable finance disclosure regulation, etc) is how the EU proposes to finance the transition, by integratingenvironmental social and governanceconsiderations into investment decisions in order to facilitate the reallocation of both private and public capital into more sustainable activities.

The investment funds industry has reached a watershed moment, with almost half of the world’s assets under management now committed to meet climate-change goals, in a shift that could have huge implications for larger companies.

The Net Zero Asset Managers Initiative, launched in December 2020, aims to galvanise the asset-management industry to commit to a goal of net zero emissions by 2050. The initiative means that asset managers would be forced to divest their holdings in companies that are unwilling to align their corporate interests or behaviours in order to meet their net zero targets under the initiative.

Litigation and shareholder activism

This hardening of climate regulation is also influencing investor activism (as seen at recent AGMs for Amazon, Chevron, Exxon, Facebook, etc) and litigation in the courts. Environmental groups have successfully brought cases in the Netherlands, France, and Germany to establish that climate legislation hasn’t gone far enough to protect citizens’ fundamental rights to life and human dignity.

In May, a Dutch court ordered Shell plc to ensure that the aggregate annual volume of all CO2 emissions of the Shell group, its suppliers, and customers is reduced by at least 45% by 2030, relative to 2019 levels. This ruling (pending appeal) could potentially lay the foundations for further climate-change litigation against non-state emitters of CO2.

Obstacles to success

Delivering on the 2021 act’s commitments will have major implications across all sectors of society, the economy, and the environment. In June 2021, the IMF released a selected issues paper estimating that the Irish Government will need to invest €20 billion annually (or 5% of GDP) for the next ten years in climate-related infrastructures and mitigation measures to achieve the emissions reduction targets laid down in the act.

While the sum suggested by the IMF is colossal (and almost as much as the amount spent by Government on pandemic-related measures in 2020), the central point here is that the Government genuinely believes that Ireland can build a growth strategy around the net zero transition that will create new jobs and opportunities for future generations, which will offset the cost of this gargantuan investment.

Ireland’s overall reduction in GHG emissions in 2020 was 6% (primarily due to COVID-19), and official data from November 2020 from the EPA showed that national GHG emissions declined in 2019 by 4.5% compared with 2018 levels to 60 million tonnes CO2-equivalent, despite the economy continuing to grow.

Agriculture

Agricultural activities account for 35% of Ireland’s annual GHGs, which is the highest share of emissions from agriculture across any European state. The IFA has voiced strong concerns in relation to the ‘just transition’ and ‘climate justice’ elements of the proposed legislation, which suggests that engaging with the agricultural sector will be a critical obstacle to overcome, as drastic sectoral cuts will be required – and these will be extremely challenging for farmers to achieve.

However, with great change comes great opportunities to diversify income streams for the sector. Almost every farm has the potential to generate renewable energy for its own use (or to produce energy feedstocks for others to generate) and, ultimately, to generate power to the national grid.

A workable microgeneration support scheme (such as rooftop solar PV) could provide supplementary income for farmers and create much needed rural employment.

Bioenergy also has the potential to reduce the environmental impact of farming, in particular biogas produced by anaerobic digestion, which has significant benefits by way of reduction in emissions and is a mature technology in Britain and Europe.

There is a compelling business case for an indigenous biomethane industry in Ireland, based largely on agricultural waste, as evidenced by the 2019 KPMG report. It concluded that an indigenous biomethane industry would stimulate the rural economy by promoting a circular economy through utilising agri by-products and grassland potential to create energy for homes and businesses, while promoting sustainable farming practices and abate over 2.6 million tonnes of CO2 emissions per annum.

Ireland’s commitments

The 51% target is ambitious, and no other country in the world, apart from Denmark, has committed to halving emissions in a decade based on 2018 levels. Ireland failed to meet both its EU 2020 commitments in terms of renewable energy (excluding the RES-E subtarget) and emissions reduction, and had to achieve compliance through the purchase of statistical transfers of renewable energy and emission-reduction credits from Denmark and Estonia at a cost of €50 million.

All the technologies, concepts and interventions required to reach ‘net zero’ exist today in some form (with the less mature technologies, such as green hydrogen and carbon capture, less cost-effective and policy certain in the short term); however, they must be radically scaled up across the economy.

The act is a vitally significant step for the Irish State in pursuit of its climate objectives, but it remains to be seen whether the results achieved can match the ambition envisioned.

The purpose of climate legislation is to establish clear and legally binding targets that apply economy-wide, from which more detailed policies will flow and, thus, provide certainty to all parties that the Government is taking its climate responsibilities seriously.

From this perspective, the act has certainly achieved this goal, as it has now normalised climate action within the political sphere. However, the hardest challenge for the Government in achieving its commitments will be educating and convincing the general public, so they may understand and accept that achieving a decarbonised society by 2050 will be worth the increased costs and behavioural changes necessary as a society to attain it.

In conclusion, the words of Frans Timmermans (European Green Deal lead and executive vice-president of the European Commission) appear prophetic in saying that “this is the make-or-break decade in the fight against the climate and biodiversity crises”.

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Ronan O’Grady is head of legal at Solar 21, Rathcoole, Co Dublin