Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I thank the Chair and committee for the invitation to speak to them today. I am accompanied by Mr. Ken Cleary and Mr. Patrick Moran from the climate division in the Department of Public Expenditure, National Development Plan Delivery and Reform. I look forward to engaging with the committee and discussing the role of my Department in achieving the sustainable transition of society and our economy in line with our national climate objectives.

We face a number of threats to our future prosperity, but none more pressing than climate change. There are no longer any serious arguments about the necessity to eliminate greenhouse gas emissions. The only question is how best to do so, in particular how we can balance the requirement to act quickly while also providing for a growing population and maintaining an economy that can support the investments that need to be made. Within this challenge, how we will deal with the inevitable trade-offs, some of which are already rising to the forefront of public debate, is critical.

The Government has, I believe, grasped this nettle by ensuring there has been an approach to incremental and permanent decarbonisation that is strategic and sustainable. We are seeing the fruits of this policy. Last year, 39% of our electricity came from renewable sources, reaching 52% in December. In addition, in 2023 almost 40,000 electric vehicles were sold, heat pumps were installed in more than 90% of new homes and nearly 50,000 homes were retrofitted. All of this contributed to a likely fall in emissions of between 4% and 5%.

However, there is so much more to do. New policies are needed and we must redouble our efforts to accelerate the implementation of those policies we have already committed to. In this regard, a Chathaoirligh, I am an optimist. We have the technological solutions today to achieve most of the decarbonisation we need by 2050. It is now a matter for policy makers to determine how we can implement the required changes in a manner that is fair, equitable, cost-effective and brings our society with us rather than fosters dissent.

This is far easier said than done. The work the Department of Public Expenditure, National Development Plan Delivery and Reform is engaged in will, I hope, help us in this endeavour. I would like to outline some of our key climate achievements and give the committee a flavour of our work for the coming years.

Before I do so, it is worthwhile setting out the legislative framework that we operate under. The Climate Action and Low Carbon Development Act has created a rigorous system for achieving our national climate objectives. It aligns responsibility for reducing emissions with resources and wider sectoral responsibility. It ensures accountability, with the relevant Ministers required to report to this committee, and creates independent oversight through the statutory Climate Change Advisory Council. The Act also obliges Government to achieve the best possible value for money, consistent with the sustainable management of the public finances, and to maximise, as far as is practicable, the net benefits to society, taking into account the impact of greenhouse gas emissions.

Central to the achievement of these targets in this manner are our ambitious public investment plans. The €165 billion national development plan is the largest and greenest capital plan in the history of our State. It will see capital investment in Ireland reach some of the highest levels in the developed world. The investments planned provide for the decarbonisation of society, while meeting the needs of 1 million additional people by 2040. In budget 2024, the Government announced that it will be supplemented by a further €2.25 billion from windfall corporation tax receipts between 2024 and 2026.

In 2026 and beyond, the infrastructure, climate and nature fund will see a further €3.15 billion State investment in projects that reduce greenhouse gas emissions, boost biodiversity and improve water quality.

The effective implementation of policies that blend regulation, behavioural change and taxation measures with direct Government investment will lead to the achievement of Ireland’s climate objectives in a manner consistent with the climate Act. This means using Government funds to leverage and drive investment from businesses and households in support of these objectives. Government policy on energy efficiency is a tangible example of this innovative use of Government funds. A low-cost loan scheme will be launched in the coming weeks to allow more homeowners to make the investments needed to make their homes warmer, more comfortable and less exposed to changes in energy prices. This is complemented by the warmer homes scheme, which offers energy efficiency upgrades free of charge to the homes of those most in need. The Government's policy on energy efficiency has been designed to be comprehensive and socially progressive. We could not do this without our core carbon tax regime.

As Minister for Finance, I introduced the legislation that put into effect the Government’s commitment to increasing carbon tax, providing certainty to our economy and encouraging low-carbon investment decisions to be made now and not postponed. Our policy, unlike that of any other EU member state, provides a legislated schedule of annual carbon tax increases, with every additional euro raised recycled to generate the resources we need to decarbonise the economy. For budget 2024, this was worth €788 million, bringing the total amount of funding to support climate action since 2020 to €2.2 billion. This is paying for our energy efficiency schemes and for agri-environmental schemes to allow farmers to reduce their emissions and, critically, it will address fuel poverty and support the least well-off in society. Analysis has consistently demonstrated that those households on the lowest incomes are materially better off as a result of the social protection measures funded by the increased carbon tax than they would otherwise be.

As well as allocating funds, my Department is responsible for setting the framework the Government uses to consider the costs and benefits of public capital investments. I published the latest version of these infrastructure guidelines late last year. Capital investments give rise to greenhouse gas emissions, both in the construction sector and in the ongoing operation of the asset. Given the enduring impact of greenhouse gas emissions, it is vital our infrastructure guidelines take into account the emissions impact of investment decisions. Every project is required to quantify the greenhouse gas emissions it may give rise to and a shadow price of carbon is applied. My officials have been working with the Centre for Marine and Renewable Energy Ireland at UCC to undertake modelling on a range of price scenarios to update the shadow price of carbon to better align with our climate targets. Over the past nine months, we have piloted the application of these new values among a range of appraisals within a range of Departments, including in the low-cost loan scheme I mentioned. My Department is in the final phase of consideration of the new values and I hope to make a final decision in the coming weeks. It is worth reiterating that improving our economic appraisal tools does not determine policy choices but does, I believe, better inform them. An accurate shadow price of carbon ensures the cost of emissions are properly considered when evaluating which projects are of overall benefit to society. It also prompts lower carbon choices in project design and ensures that the Government will recognise cost-effective opportunities to make investments that can reduce emissions.

This appraisal also applies to new investments. My Department is also working on green budgeting methodologies that can provide information to the public and policymakers on the impact of all spending decisions, including those that have been taken, with a view to improving outcomes. Since I announced Ireland’s introduction of green budgeting reforms in 2018, we have made significant improvements year after year. We are considered to be at the forefront of international developments in this space and this is confirmed in the latest OECD survey, which, as of 2022, puts Ireland second highest in green budgeting among all the OECD countries. My Department chairs the OECD’s Paris Collaborative on Green Budgeting and will chair the European Commission’s annual green budgeting conference taking place in Brussels next month. We introduced the latest steps in our green budgeting initiative in December 2023. Monitoring of climate- and environment-related expenditure was extended to include all six of the EU's taxonomy for sustainable activities criteria. We now also capture expenditure allocations that may have unfavourable impacts on climate and environmental outcomes. Green budgeting initiatives and the wider performance framework play an important role in enhancing the level of accountability and transparency surrounding spending on climate action and the environment. This approach also generates insights that can be used to guide the evolution of climate policy.

Alongside my Department’s commitments under the climate action plan, I also have a role in supporting emissions reductions in the public sector. While decisions on resource allocation within a sector can only be made by the Minister responsible for the sector in question, my Department plays an active role on the heat and built environment task force, the implementation focus group and the public sector working group of that task force. No less important is our work through the Office of Government Procurement in ensuring our public services operate in line with our climate objectives. This includes work on the capital works management framework to deliver public sector construction procurement reform, the financial appraisal of projects based on the total cost of ownership, including environmental considerations, and the promotion of green public procurement. These all seek to ensure that goods, services and works with a reduced environmental impact throughout their life cycle will be prioritised and that public services can be delivered to meet the needs of a decarbonised society.

It is worth reflecting on the scale of the challenge we face and the efforts we are making to address it. I have described some of what the Government is doing to achieve this and a few of the steps my Department is taking, but these represent only a portion of the activities we are engaged in. Fundamentally, we are managing the growth in public expenditure on a sustainable basis, we are improving the evidence and analytical base to allow better informed policy decisions to be taken, and we are setting the frameworks to support investment decisions that incorporate climate considerations. With many of the critical decisions taken, our focus now has to be on implementation. We know the challenges that face us and the benefits that climate action can bring, but we also know the costs if we do not act.

I thank members for their attention and look forward to their questions. I hope this address has given an overview of the work we do.