Oireachtas Joint and Select Committees
Thursday, 21 November 2019
Public Accounts Committee
2018 Annual Report of the Accounts of the Public Services
Chapter 9 - Greenhouse Gas-Related Financial Transactions: Discussion (Resumed)
9:00 am
Seán Fleming (Laois, Fianna Fail)
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We resume our discussion of the Comptroller and Auditor General's Report on the Accounts of the Public Services 2018, chapter 9, which deals with greenhouse gas-related financial transactions and matters relating to carbon tax. We have already had a meeting with the Central Statistics Office and the Economic and Social Research Institute on this topic. They have carried out some related research which was discussed by the committee and we are very grateful to both organisations for that research and for making themselves available to the committee.
We are joined by the Comptroller and Auditor General, Mr. Seamus McCarthy, as a permanent witness to the committee and he is joined this afternoon by Mr. Ciaran Crowe, senior auditor. From the Department of Communications, Climate Action and Environment we are joined by Mr. Brian Carroll, assistant secretary, Mr. Frank Maughan, principal officer, Mr. Eamonn Confrey, principal officer, and Ms Catherine McGinty, assistant principal. I remind members, witnesses and those in the Public Gallery that all mobile phones must be switched off. That means having them on airplane mode, as merely putting them on silent mode can interfere with the recording system.
I advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person, persons or entity, by name or in such a way as to make him, her or it identifiable.
While we expect witnesses to answer questions asked by the committee clearly and with candour, witnesses can and should expect to be treated fairly and with respect and consideration at all times, in accordance with the witness protocol. I invite Mr. McCarthy to make his opening statement.
Mr. Seamus McCarthy:
As members are aware, a key responsibility of the Department of Communications, Climate Action and Environment is to deliver national policies and programmes in the climate change area. Operating under the Department's aegis, the Environmental Protection Agency monitors and reports on the level of Ireland's greenhouse gas emissions.
Through its EU membership and participation in various international agreements, Ireland is committed to a number of climate action targets. While some of these have been adopted voluntarily, others are binding and there will be significant financial consequences if they are not met. Following on from these commitments, Ireland is pursuing climate targets through a combination of carbon pricing and taxation, payment of grants and subsidies, regulation and public awareness campaigns. These activities give rise to financial transactions but because they are spread across a wide range of State organisations, the net impact on the Exchequer finances is not readily visible. My objective in compiling this report was to present an overview of the key current financial transactions that are related to greenhouse gas emissions.
In the context of EU climate policies, a distinction is made between greenhouse gas emissions emanating from sectors of activity subject to the EU emissions trading system, ETS, and those of all other, non-ETS, sectors. In Ireland, economic activity subject to the ETS accounted for about 28% of emissions in 2017, which is low by comparison with the EU average. This includes power generation, manufacturing and industrial processes. The level of emissions allowed for each operator declines each year, and if the cap is breached, carbon credits must be purchased through an EU-wide auction system. Revenues from the auction of credits is divided between European Union member states, which must use at least 50% of the proceeds to finance specific climate and energy programmes. Ireland's Exchequer has benefited from such sales to the amount of €367 million between 2013 and 2018.
Since 2013, separate targets apply to non-ETS emissions, which accounted for 72% of Ireland's output of greenhouse gases in 2017. This includes the agriculture, transport and residential sectors. On the basis of projections that Ireland's greenhouse gas emissions for the period 2008 to 2012 would exceed the level committed to under the Kyoto Protocol, resulting in an obligation to surrender what are referred to as carbon credits, the State spent a total of €121 million on acquiring carbon credits. Ultimately, Ireland met its emissions target for that period, but mainly due to the contraction in economic activity as a result of the banking and financial crisis. Just over one third of the credits acquired had to be surrendered at the end of the target period. The balance of the credits remains to assist in meeting further obligations as they arise.
In contrast to the first Kyoto period, the Environmental Protection Agency projects that Ireland will not meet the non-ETS emissions reduction target for the 2013 to 2020 period. The available unused carbon credits are not expected to be sufficient to meet the resulting obligations. The Department has estimated that the cost of purchasing additional required credits in 2020 will fall within a range of €2 million to €14 million, depending on the quantity of credits required and the prevailing market price.
In terms of renewable energy, Ireland has a mandatory target for at least 16% of gross final energy consumption to come from renewable sources by 2020. While progress has been made in that regard, it is expected the target will not be met. Based on the likely shortfall projected by the Sustainable Energy Authority of Ireland, the Department estimates that the future cost associated with failure to achieve the target could be in the order of €110 million. Against a targeted improvement of 20% in energy efficiency by 2020, the latest projections indicate that the actual increase will be around 16%. However, as the energy efficiency target is non-binding, there is no direct financial penalty for failing to achieve it.
Carbon tax is one of a number of environmental taxes based on the consumption of fossil fuels. While other fuel-related taxes were introduced for revenue raising purposes, carbon tax is intended to have a disincentive effect on the consumption of such fuels by raising prices. Exchequer receipts of carbon taxes in 2018 amounted to around €431 million.
A range of State bodies are incurring substantial climate-related expenditure. At the same time, the State is receiving significant income in the form of environmental tax receipts and revenue from the auction of emission allowances. However, there is currently no comprehensive national account to capture this income and expenditure. Even in individual accounts where climate-related transactions are recorded, there is little transparency. The report concludes that it would be timely for relevant Accounting Officers to consider including additional information and disclosures on climate change initiatives in the statutory accounts they produce.
Seán Fleming (Laois, Fianna Fail)
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I thank Mr. McCarthy. I now invite Mr. Brian Carroll to make his opening statement.
Mr. Brian Carroll:
I thank the committee for the opportunity to address it today on chapter 9 of the Comptroller and Auditor General's Report on the Accounts of the Public Services 2018, dealing with greenhouse gas-related financial transactions. The chapter examines transactions associated with Ireland's participation in the EU emissions trading system and purchases of credits by the State for compliance with Ireland's commitments under the Kyoto Protocol between 2008 and 2012, and the EU effort sharing decision, which spans the period 2013 to 2020. The report also briefly examines the revenues accruing to date from carbon tax. The report notes that a total of €121 million has been spent to date on the purchases of credits for Kyoto Protocol and effort sharing decision compliance, with a further amount of between €2 million and €13 million expected to be required to meet the costs of purchasing further credits for compliance with the effort sharing decision. The report also examines the costs of compliance with Ireland's renewable energy targets for 2020.
The report does not examine other transactions or expenditure associated with the implementation of climate change policies, whether in the Department of Communications, Climate Action and Environment or elsewhere.
The report recommends that accurate and comprehensive information on relevant costs, including costs of abatement measures and carbon credit purchases, and incomes, including auction revenues and tax yields, would assist in informing future decisions on climate change initiatives and notes that, in budget 2019, the Minister for Public Expenditure and Reform indicated his intention to introduce a green budgeting framework with the aim of embedding climate change in the budgetary process. Implementation of this framework offers the opportunity to develop a comprehensive national account capturing income and expenditure relating to climate change initiatives.
The Department also notes and welcomes the recommendation of the Comptroller and Auditor General regarding the provision of additional information on climate change related policies and measures in the statutory accounts of Departments. The Department of Communications, Climate Action and Environment supports this recommendation which it considers will help to improve both the transparency as well as the robustness of evaluation of climate change policies across all Departments.
The Government published its climate action plan on 17 June. The plan sets out, for the first time and on the basis on the best available evidence, the measures that are required to meet our 2030 targets, with the burden shared across all sectors. The plan will also put us on the right trajectory towards net zero emissions target by 2050.
In respect of the of the Comptroller and Auditor General report's assessment of the distance to target for 2030 compliance, presented in figure 9.11, it is important to note that the report uses EPA projections that do not yet take into account the impact of the climate action plan. The EPA is currently updating these figures as part of finalising the national energy and climate plan, for submission by the Minister to the European Commission by the end of 2019.
The climate action plan contains a strong focus on governance and accountability, including a commitment to publish progress reports quarterly. The first such progress report, launched at the end of October, shows that 85%, or 149, of the actions due for delivery in quarters 2 and 3 of this year have been delivered, with the remaining in progress and due for delivery by the end of the year.
At the end of September, there was approximately 4,100 MW of renewable generation capacity connected to the national grid. Of this, wind generation accounted for over 3,800 MW. The most significant progress towards our 2020 renewable energy targets has been made in renewable electricity and we expect to be at or very close to the 40% sub-sectoral target for renewable electricity by 2020. In the transport sector, we expect to achieve over 9% of the 10% target primarily due to the biofuels obligation scheme with electric vehicles also making a contribution. The target in renewable heat is more difficult due in part to our dispersed population and our reliance on fossil fuels for a large share of our domestic heating. The support scheme for renewable heat and supports for the roll-out of heat pumps under the national development plan are important measures to help us close the gap to target.
The fact remains that we are projected to have a shortfall to the renewable targets of approximately 3 percentage points based on analysis by the Sustainable Energy Authority of Ireland. Ireland will not be alone in falling short of our 2020 targets and there are compliance mechanisms available to us, known as statistical transfers, to enable us to purchase compliance. The cost of purchasing statistical transfers should any potential shortfall in Ireland's target arise has yet to be established and will depend on a number of factors, particularly the availability of supply and market costs. The focus of the Department is on maximising renewable energy in our energy mix by 2020 and on implementation of the comprehensive actions set out in the climate action plan that will enable our transition to a low-carbon economy.
Seán Fleming (Laois, Fianna Fail)
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I thank Mr. Carroll for his opening statement. I call Deputy Cullinane who was the first to indicate.
David Cullinane (Waterford, Sinn Fein)
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I want to start with some of the facts presented in Comptroller and Auditor General's special chapter and in his opening statement. On the non-ETS targets, he stated,“On the basis of projections that Ireland’s greenhouse gas emissions for the period 2008 to 2012 would exceed the level committed to under the Kyoto Protocol". That happened but, as he also stated: "Ultimately, Ireland met its emissions target for that period, but mainly due to the contraction in economic activity".
David Cullinane (Waterford, Sinn Fein)
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In other words, the crash saved our bacon or our blushes? Would that be the case?
David Cullinane (Waterford, Sinn Fein)
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An interpretation that could be seen as fair.
David Cullinane (Waterford, Sinn Fein)
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When we consider energy targets in terms of renewable energy, there was a mandatory target for at least 16% of gross final energy consumption to come from renewable resources. We will not meet that target. Is that correct?
David Cullinane (Waterford, Sinn Fein)
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Yes. That will cost the State €110 million. Will the Comptroller and Auditor General remind us how it will cost us €110 million?
David Cullinane (Waterford, Sinn Fein)
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It is a target we will not meet and it will cost us money.
David Cullinane (Waterford, Sinn Fein)
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That will have to be worked out. We will figure it out in 2020. It appears that we will not meet the 20% energy efficiency in respect of the 2020 target and that the actual figure will be in the region of 16%. Those are the figures in the Comptroller and Auditor General’s report, the global figures under the Paris Agreement and the targets we have to meet by 2030. We had representatives of other Department and other organisations before the committee and it appears we will not meet those targets either. We are not in a good place in the context of reaching targets we either set for ourselves or to which we have signed up. Will Mr. Carroll agree that would be a fair comment to make?
Mr. Brian Carroll:
I wish to comment first on the 2030 target. I mentioned the projections in the Comptroller and Auditor General’s chapter for 2030 are based on EPA analysis, which had not incorporated the measures included in the climate action plan published earlier this year. When we were putting the climate action plan together it was based on analysis to bring forward the most cost-effective measures to ensure that we meet our 2030 target.
David Cullinane (Waterford, Sinn Fein)
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There is a new climate action plan in place but before it came into being, the reality, as per the facts presented by the Comptroller and Auditor General, is that the State is failing to meet all the targets set out in his report. Unless drastic changes occur as a consequence of implementing the climate action plan, and we do not know what that will mean, the assumption from representatives of organisations which came before us is that it is unlikely we will reach the targets we have set ourselves for 2030. A problem I have with this, and I said this to the representatives of the Economic and Social Research Institute and the Central Statistics Office when they appeared before the committee, is that when we push a target out for that length of time and have such a target for 2030, a representative appearing before the committee today in 2019 or in 2020 or in 2021 can say what will be done down the road might get us to 2030 target. However, Mr. Carroll will possibly have left his position by that time and somebody else will most likely be telling the person in my seat, if I am not here, that we have not reached our targets. The problem is that while we have long-term targets, we do not have short to medium term ones to allow us to properly assess what is and is not being achieved.
Mr. Brian Carroll:
If I could comment on that, the climate action plan envisages bringing forward new climate legislation to provide for carbon budgets on a sectoral basis. The first carbon budgets are to be in place from 2021 to 2025, 2026 to 2030 and 2031 to 2035. There will be a role for the Climate Change Advisory Council on advising Government on an economy-wide basis what those five-year carbon budgets should be. It will then be the responsibility of the Minister to recommend to Government and the Oireachtas the acceptance of those budgets and the division of them on a sectoral basis. They will provide annual ceilings that sectors will have to remain under in order to meet the climate obligations.
David Cullinane (Waterford, Sinn Fein)
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That may or may not be the case. This committee carries out look-back exercises in respect of previous year, two years, three years or five years. Today, we can benchmark Mr. Carroll's Department and the State against targets they set themselves five years, ten years or two years ago. Leaving aside what might happen in the future, I accept that there is a new climate action plan and that there will be more scrutiny and more targets set for each line Department.
I sit on the committee which will be responsible for scrutinising the Department so that is a step forward. In terms of what has gone before us, however, is it fair to say that we have been in a position where we have not reached the targets that we either set ourselves or were set for us as part of overall agreements?
Mr. Brian Carroll:
If the Deputy goes through the targets, it is as the Comptroller and Auditor General reported. There will be a shortfall in terms of our emissions target to 2020. We are expected to reduce our emissions by 5% to 6% relative to the target set. In terms of renewable energy, as reported by the Comptroller and Auditor General, we had a 16% target for renewable energy. We will hit 13% on that. If that is broken down as a 40% target for renewable electricity, we have made very strong progress on renewable electricity and may get close to the 40%.
On transport, it was a 10% target. We are predicting we will hit 9% out of the 10%. The area that is most problematic is the renewable heat component of the target. Our disbursed settlement pattern and the associated challenges with that is probably the reason we are finding it more difficult on the renewable heat target. There are ambitious targets in the climate action plan to retrofit 500,000 houses by 2030 and to install 400,000 heat pumps, which is a technology that is suitable for disbursed settlement patterns and in shifting them towards renewable heat.
David Cullinane (Waterford, Sinn Fein)
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I wish Mr. Carroll well in all of the work he does. We all want to make sure that we reach our targets and we are all focused on making sure that climate action means action and that we reach the targets we set. We have to be honest, however, and say that up to now we have not and in many areas we are lagging behind. Mr. Carroll talked about retrofit. The Taoiseach is at an international conference today and he spoke about a €50 billion retrofit. That is how much it will cost to retrofit every home in the country. Is it possible to retrofit every home in the country?
David Cullinane (Waterford, Sinn Fein)
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That is my point. It is easy to throw out those figures and say that we will do something by 2050. Let us come back to planet earth. In reality, will we be in a position in 2050 where we will have spent €50 billion on retrofitting homes? That is what drives people mad because they want to engage and want to be able to make the changes. People whose homes are heated by oil or gas are listening to this discussion and they are the ones who are subject to carbon tax increases, which I will get to shortly. When we say that by 2050 we will have spent €50 billion on deep retrofit or retrofitting people's homes, is that a credible objective for the State to set itself in terms of whether it can be met? If it can be met, where will the money come from to pay for it? Will it be on the households? Will the State, or homeowners, have to borrow? I cannot see €50 billion being spent by the State on retrofitting homes by 2050. I might be wrong, and Mr. Carroll might be able to correct me on that.
Mr. Brian Carroll:
A couple of comments could be made on that. The €50 billion is based on today's costs. It is the total investment required, not distinguishing between what the State, and the private sector, might contribute. That is the first important distinction to make. The second is that in the climate action plan there is a new model of retrofitting to be brought forward where we are seeking to aggregate groups of houses and, through aggregation, achieve economies of scale. The expectation would be that over time the costs of retrofitting houses will fall.
David Cullinane (Waterford, Sinn Fein)
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The most recent retrofit programme the Department rolled out ended up in controversy because, as Mr. Carroll knows, there were people who were not discouraged from making an application - I believe that was the issue - so they applied and then did not get it. What was the average amount of money householders in that particular scheme would have had to contribute to benefit from that deep retrofit?
David Cullinane (Waterford, Sinn Fein)
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Just give me the average figure, if Mr. Confrey has it.
David Cullinane (Waterford, Sinn Fein)
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What would the householder have had to come up with in terms of capital?
David Cullinane (Waterford, Sinn Fein)
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It would be more than a couple of thousand euro. Define "a couple". It definitely was not €1,000 or €2,000; that is for sure. It was much higher than that, was it not?
David Cullinane (Waterford, Sinn Fein)
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Would it be more than €10,000, on average?
David Cullinane (Waterford, Sinn Fein)
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I think it was because we had the witnesses before the committee. How many people that we represent have that kind of money to spend on deep retrofit? If we are making schemes available to deep retrofit homes, let us not do it for the people with the deepest pockets who can afford to deep retrofit and then have all of the benefits that come from energy efficiency. When carbon taxes increase they benefit, but the vast majority of people who do not have the money do not get any State supports to enable them to retrofit are the ones who lose out.
I will come to carbon tax. The Comptroller and Auditor General rightly said that the Exchequer collected €431 million in 2018 but €3.35 billion was collected since the carbon tax was introduced. If he can, will Mr. Carroll tell me on what that €3.35 billion was spent?
Mr. Brian Carroll:
The carbon tax that was collected to date went into the general base of Exchequer expenditure. I am not in a position, in terms of carbon tax receipts to date, to explain where that money was spent. What I can say is that in terms of increases in the carbon tax expenditure, and the first was in the budget of this year - it was a €6 increase - the money generated by that increase is very clearly ring-fenced for climate action activity. The figure was €90 million in total for next year. That is broken down in terms of protecting the vulnerable, with €21 million towards the fuel allowance; efficiency upgrades, €13 million; €20 million for the midlands to retrofit social housing; €5 million for peatlands rehabilitation; and €6 million for the Just Transition Fund. There are other allocations for greenways: urban cycling, €9 million; electric vehicles, €8 million; further investment in electric vehicle, EV, charging infrastructure, €3 million; the Green Climate Fund for overseas development aid, €2 million; and green agricultural pilot schemes, €3 million. The €90 million that is coming from the €6 increase is fully accounted for in terms of climate mitigation expenditure. Prior to the increase this year, receipts went into general revenue receipts and formed part of the general expenditure base.
David Cullinane (Waterford, Sinn Fein)
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With respect, I accept that Mr. Carroll has a job to do. He is coming into this committee and giving us what is the Government and the Department line. Here is the reality. The money is still going into general Government expenditure. There is no hypothecating of any money and there is no ring-fencing. Mr. Carroll can give us many line items that might be in any particular budget and say that is because we increased the carbon tax but the headline figure of €3.35 billion was raised from households, businesses and working families, in terms of carbon taxes, since 2010. The Department of Communications, Climate Action and Environment and the Department of Finance, whose representatives are here, are unable to tell us on what that money was spent. What we do know is that last year, carbon emissions did not go down. Is it correct that they increased slightly?
David Cullinane (Waterford, Sinn Fein)
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It was, very slightly. Agriculture, and another area, was up. We have taken €3.3 billion out of people's pockets. It has gone into general Government expenditure. It was not spent on enabling people to make a transition to reduce their carbon footprint. Mr. Carroll is now telling us that will happen with only the surplus of what the increase will be, not the overall figure. What is projected to come in on carbon taxes in 2020? I am not just asking about the increase but the overall figure.
David Cullinane (Waterford, Sinn Fein)
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That is the increase. I am talking about the overall figure.
David Cullinane (Waterford, Sinn Fein)
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If we took in €431 million in 2018, it will not be €200 million in a full year.
Seán Fleming (Laois, Fianna Fail)
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This is the reason the Department is here. I find it extraordinary. This is the lead Department when it comes to climate change and it does not even know how much money is being collected in carbon tax. That is the reason it is here. After the previous two meetings, we thought we would have had this information. We understand that sectoral committees and other committees will be looking at the future plans.
David Cullinane (Waterford, Sinn Fein)
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I would imagine the figure is over €500 million and up to approximately €520 million. Perhaps the Comptroller and Auditor General would have the figure.
Mr. Seamus McCarthy:
I am looking at the statement in the budget briefing. The increase of €6 per tonne will be applied to petrol and auto diesel from midnight on 8 October and to all other fuels on 1 May 2020, so presumably whatever is generated in 2020 is not the full impact of it. That could explain at least some of the discrepancy.
David Cullinane (Waterford, Sinn Fein)
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If we took in €431 million in 2018, and even if it is not a full-year increase, it is probably going to be close to €500 million, say, €460 million or €470 million. Why is that entire amount not ring-fenced for climate action measures if it is so urgent? The Department is telling us there is a climate action plan and that we are going to get better at reaching our targets, yet all it has done is tell us that €70 million is ring-fenced. I will deal shortly with the issue of the money that is ring-fenced and also the midlands issue. We had the trade unions before the Joint Committee on Communications, Climate Action and Environment recently and they were quite critical of the Government, Bord na Móna and ESB response to just transition. Why is the entire take for next year not ring-fenced? If climate action is so important, which it is, why is only the increase ring-fenced?
David Cullinane (Waterford, Sinn Fein)
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With all of the challenges, this is €70 million. We are talking about just transition. At an international conference the Taoiseach said that deep retrofitting will cost €50 billion by 2050. We have major problems with public transport in rural Ireland and in all of the regional cities outside of Dublin, such as Cork, Limerick, Waterford and Galway, and many rural towns and villages have no public transport, and the Department is telling us it will ring-fence €70 million. Whoop-de-doo, €70 million of the carbon tax will be ring-fenced for climate action measures. Does Mr. Carroll see that as a woefully unambitious target for the Department to set itself?
Mr. Brian Carroll:
In terms of money allocated for 2020, there is a lot more than the €90 million. I was trying to explain where the incremental piece of carbon tax was going. I know the Deputy is very focused on the €431 million that was received but, in terms of a breakdown of expenditure for next year-----
David Cullinane (Waterford, Sinn Fein)
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Mr. Carroll could tell us that the €500 million, if that is what it is, comprises line items in any part of the Department's spend that it could in any way envisage were green-related, and say it is ring-fencing the entire €500 million. It is nonsense to come in here and say the Department is ring-fencing money when, in reality, it is not. Yes, investments are being made but the Department is increasing the carbon tax on households, many of which do not have the ability to make the changes they need and want to make. Rather than enabling them to make the changes, what the Department and the Government has done is increase the carbon tax this year and they say they will increase it for the next number of years. At the same time, they have a very unambitious plan to provide people with the alternatives that will allow them to make the behavioural changes they need to make.
Mr. Brian Carroll:
The Government has committed that all increases in carbon tax will be allocated to climate action. On budget day, the estimate was that over the period to 2030, that would amount to an additional €5 billion. That is a very significant increase in expenditure over and above what is in the national development plan in the period out to 2030.
I will come back to carbon tax. A point I wanted to come back to was in terms of helping those who are poorer in the transition. We have a warmer homes scheme for people on lower incomes and that funds 100% of the retrofit in homes of people who are poor. It as a scheme run by the Sustainable Energy Authority of Ireland.
David Cullinane (Waterford, Sinn Fein)
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Hang on a second. This is more of the nonsense. Those people Mr. Carroll is talking about have their homes heated by oil or gas. If an increase is put on their oil or gas, although insulation can be put in their homes and that is fine, they are still using oil and gas, and what the Department is doing is increasing the cost for them. It is not allowing them to transform their home into one that has an electric heat pump, for example, or some alternative and it is going to take an awful long time for us to get to that position. It is just increasing the carbon tax on them, not just this year, but next year, the year after and the year after that.
I have a question on the just transition, which is important. We had the trade unions before the Joint Committee on Communications, Climate Action and Environment recently and Patricia King headed a delegation of the Irish Congress of Trade Unions. She was scathing in her criticism of the Department, the Government, Bord na Móna and the ESB. Two plants were closed and no just transition has been put in place. Ms King feels many of the workers will lose their jobs without any transition being in place. Bord na Móna has refused even to engage with the unions and is refusing to engage with the just transition forum that the Government says is going to be put in place. An announcement was made prematurely to close the two ESB plants in question and three Government Ministers scrambled down to the midlands to talk to the workers.
Mr. Carroll talked earlier about the €70 million that will come from the carbon tax increase in a full year. The Comptroller and Auditor General might be right that it may not be €70 million next year but we will see what that figure is. Mr. Carroll talked about the money for the midlands that is being made available for retrofitting. There is no retrofit plan in place. They are still looking at the detail of it and trying to work out what that will mean. The Department does not have a plan for those workers.
We all knew a just transition was necessary. We all knew for years that those plants were going to have to close and that there had to be plans in place. Yet, here we are, already prematurely closing some of the plants, when the trade unions who represent the workers say the just transition has been a farce. A just transition commissioner is being appointed who does not have any remit in regard to workers - none whatsoever. Is that not correct? Ms King was quite critical of that as well. How is it the case, when we have workers potentially losing their jobs, that the most senior trade union leader in the country can say Bord na Móna is refusing to engage with the unions and is involved in de-unionising the company?
Mr. Brian Carroll:
I will come to the just transition shortly. To go back to the Deputy's earlier point on the fuel poor and the impact of the carbon tax on them, it is important to note that more than one third of the funds raised by the increased carbon tax are devoted to ensuring the least well-off are protected. This is being done through two measures, first, increasing the fuel allowance by €2 per week, which applies from 1 January and means an annual benefit of €56, and-----
David Cullinane (Waterford, Sinn Fein)
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One second. I know Mr. Carroll is trying to give the response. Does he not hear the madness of that response? The whole logic of increasing the carbon tax, from the Government perspective, is to change people's behaviour. Now, Mr. Carroll is saying it will just increase the fuel allowance, so they do not use any less fuel or any less carbon. That is the madness of this.
Mr. Brian Carroll:
It will leave 22% of households who are in receipt of the fuel allowance better off than before the increase in carbon tax. It is not being done in isolation. There are also schemes available which will be rolled out over time and are currently being implemented, such as the warmer homes scheme, where 100% of the retrofitting of housing is funded. We cannot do everybody's house at once so, if we raise carbon tax, it is important to make sure the fuel allowance is the mechanism which-----
David Cullinane (Waterford, Sinn Fein)
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How will those low income households be reducing their consumption or their carbon footprint if they use oil or gas for heating their homes?
We discussed this with the ESRI when it appeared. I ask Mr. Carroll to tell me how low income households will do that. I will leave it at that when I get a response.
Mr. Brian Carroll:
It can be done through retrofitting programmes such as the warmer homes scheme, where houses are insulated and grants are available for inserting alternative heating systems into houses. It takes time to roll out those types of programmes but they are in existence. They are happening and money is being provided to do them.
Catherine Murphy (Kildare North, Social Democrats)
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There was much emphasis in the budget on the carbon tax increase being ring-fenced. I remember several years ago starting to ask about ring-fencing carbon taxes, which I did on numerous occasions. I was told we did not do hypothecation. I think that was the terminology used. There was much emphasis put on that because it was about changing behaviour. The €90 million was about changing behaviour. However, I am thinking of the totality of the €431 million in addition to the €90 million that people are paying in carbon taxes. Would Mr. Carroll not agree? If it is not ring-fenced for that, is it not just another stream of revenue?
Catherine Murphy (Kildare North, Social Democrats)
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If I may stop Mr. Carroll on that, it went into general tax receipts, so it was not about changing behaviour.
Catherine Murphy (Kildare North, Social Democrats)
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Can Mr. Carroll tell me what choices people have in terms of fuel, for example? Individuals do not have a choice. The big choices are about how electricity is to be generated. Probably the only choice people can make is how they move around - whether to use public transport as opposed to a car. They can use less energy but they cannot choose the type of energy that comes into their home. There is a limited choice on that.
Mr. Brian Carroll:
In terms of the type of energy that comes into the home we have made very significant progress in moving to renewable electricity and away from fossil fuel electricity. The Deputy is right that people have choice around whether they use public transport or travel in a car. People have choice as to whether they insulate their house. People have choice as to how they heat their homes as well.
Catherine Murphy (Kildare North, Social Democrats)
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We have fairly limited time because other members want to get in. I want to focus on why, if it is about behavioural change, it is only the increase in the carbon tax that is ring-fenced. Has the Department done any work on the relationship between behavioural change and carbon taxes?
Mr. Brian Carroll:
There is quite a bit of economic analysis that shows that increasing the price of something will cause someone to look for alternatives. That is the basic principle underlying carbon tax as a pricing mechanism. The Deputy is talking about the bulk of carbon tax and asking why that is not ring-fenced. On how money is being spent, to pick one thing, in 2014 we spent €54 million on retrofitting houses. Again in 2016-----
Catherine Murphy (Kildare North, Social Democrats)
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Of the €3.35 billion that has been collected since 2010, how much has been spent on initiatives that change our behaviour and usage? Is it possible to tell us that?
Catherine Murphy (Kildare North, Social Democrats)
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Maybe Mr. Carroll would put that together and give it to us so we can actually see what the figures are. If we are spending all that money on changing behaviour and mitigation, we must be lousy at it because we are missing our targets. It seems like a sizable amount of money. Some of it is spent on purchasing credits, although not that much. It would help if we could see the balance sheet. If they are spending money, people will want to know what they are getting for it. They have a right to see that. There is a lack of transparency and I think Mr. Carroll accepts that. A lot of schemes were promised, for example, the pay as you save scheme for utilities. That was to meet the need of people who were unable to come up with a large chunk of money by allowing them to do the retrofit themselves and then save it in their utility bills later. That was announced to great fanfare during the previous Government and it was never rolled out. I recall investment in wave energy, although it was not enough. Wavebob is one example that comes to mind. We spent something like €10 million or €12 million on that and then decided not to continue the investment. A Scottish counterpart agency took the investment we had made a stage further.
There are many positives in terms of our location and the generation of wind energy. I want to be positive about it. We could do much that is positive in this area but it seems like we are buying ourselves out of things. There is a terrible lack of leadership. It is a case of just trying to stay compliant or trying to avoid have to pay large amounts for non-compliance. Positive things could come out of that very large amount of money that was collected. We could not only meet the targets but be leaders in this area. That is really frustrating. Maybe Mr. Carroll might address some of those issues such as where the pay as you save scheme went and why we did not continue investment in wave energy, where we have a huge natural advantage. I know it is developed as wind energy but it is getting there.
Mr. Brian Carroll:
I could come in on some of those questions. One thing that impacted quite severely on our capacity to meet our 2020 target was the economic downturn in terms of having the resources available to make the types of investments needed. Those resources were not available over the period of the economic downturn. In terms of retrofitting, the first thing to say is that we are not unique. These are difficult problems to solve and it is difficult to design policies that will work. The UK tried a green deal but it did not work there. There is a task force in the Department at the moment following on from the climate action plan that is trying to design an aggregation model, which I mentioned earlier. The idea is to group houses together, achieve economies of scale in retrofitting them, and also to find innovative financing mechanisms such as low interest, low cost loans that will enable people to finance the retrofitting and avail of the savings they will make on their energy bills. For those who are in fuel poverty, we have schemes where we 100% fund the retrofitting of their homes.
They are not asked to pay any money.
Catherine Murphy (Kildare North, Social Democrats)
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Mr. Carroll told us that twice already. I regularly advise people on that point.
Mr. Brian Carroll:
I might ask Mr. Confrey to contribute on ocean energy. I was involved in that area around the time of Wavebob. We have a great resource on the west coast but, as yet, there is no settled technology for harnessing wave energy. I visited a wave test site in the north of Scotland while I was working in the area. Six or seven radically different looking devices were being tested. Sometimes one tests a device and brings it to a certain point and it will not work. Nobody has made a breakthrough in that regard. It is an area in which we are still working.
Mr. Eamonn Confrey:
Many of the devices to which the Deputy is referring, including wave or tidal, are at pre-commercial stage. There are supports through the Sustainable Energy Authority of Ireland, SEAI, and the prototype development fund which is designed to try to bring some of those technologies forward. The Deputy is correct in terms of the scale of we need to reach. The west coast generally, particularly in the context of offshore winds and larger wind turbines, is ripe for that but it will take time because conditions there are quite challenging in terms of water depth and so on. A significant amount of Government funding has been invested in test site infrastructure through successive years. We have wave-testing pools in Cork and quarter-scale facilities in Galway and we are moving to a full-scale test facility off the coast of County Mayo.
Catherine Murphy (Kildare North, Social Democrats)
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I ask Mr. Confrey to send us information within the balance sheet type of arrangement on where we are investing and what are the prospects. I ask the witnesses to summarise the financial consequences of not meeting the targets. Has that been projected? What will be our State-wide financial liability for not meeting targets?
Mr. Brian Carroll:
The consequences are summarised in the report of the Comptroller and Auditor General which provides estimates of the cost of missing the targets. I apologise that I did not have the carbon tax receipts to hand earlier in the meeting. I now have them available. Does the Chair wish me to share that information?
Seán Fleming (Laois, Fianna Fail)
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I will call out the receipts for the benefit of those watching the proceedings. I have the relevant information on my phone. Carbon tax collected on auto diesel was approximately €182 million, on petrol €48 million and aviation gasoline €39 million. I ask Mr. Carroll to deal with the remaining figures as the print on the chart I have is very small.
Mr. Brian Carroll:
For 2018, auto diesel was €183 million, petrol was €48 million, kerosene was €59 million, marked gas oil was €54 million, natural gas was €50 million and solid fuel was €25 million, while other fuels accounted for €12 million. That comes to a total of €431 million. I apologise for not having those figures to hand earlier.
Kate O'Connell (Dublin Bay South, Fine Gael)
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My concern is that one can buy one's way out of reducing carbon. The picture has become overly complicated. We need to decarbonise and there are many initiatives for so doing. I have concerns based on our most recent meetings with the Economic and Social Research Institute and the Central Statistics Office regarding the way the system is divided and Ireland's place in it. When one breaks it down, the emissions trading system is heavily weighted. Some 72% of Ireland's greenhouse gas emissions are categorised as non-ETS emissions. A third of that 72% is agriculture based. Ireland seems to be overly negatively affected by the European method of calculating or quantifying emissions because of our dependency on agricultural and the amount of food we export. Some 90% of agricultural product is exported. What are the witnesses' views in that regard? Is there an uneven playing field? Big industry has significant power in this area. The two ESRI representatives who appeared before the committee stated that once one's profit margin is sufficient to buy one's way out, one can pollute as much as one wishes. I do not need to explain this to the witnesses. If one's margin is big enough, one can pay the carbon bill. That goes completely against the aim of reducing the amount of carbon in the atmosphere and keeping as much of it in the ground as possible. Has Ireland been given a raw deal in this regard?
Kate O'Connell (Dublin Bay South, Fine Gael)
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We have that information; there is no need to repeat it.
Mr. Brian Carroll:
There is limited technological mitigation potential in agriculture. The limited mitigation potential of agriculture on an EU-wide basis and the importance of food security are recognised in the EU position and the decision published in 2014. These factors were taken account of by the EU in determining our 2030 non-ETS target. The climate action plan identifies emission reduction ranges across all sectors, including agriculture. If we deliver those reductions, we will meet our 2030 target.
On the ETS and companies having the potential to buy themselves out-----
Kate O'Connell (Dublin Bay South, Fine Gael)
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It is not potential; it is fact.
Mr. Brian Carroll:
It is up to a company to choose whether to so do. Companies choose whether to mitigate or buy their way out. That is what I meant by "potential". The ETS is a cap and trade system on an EU-wide basis. Its objective is to achieve decarbonisation within the EU. One way or another, decarbonisation happens somewhere. If a company in a particular jurisdiction chooses to buy its way out, that does not mean that the overall target for the ETS in the EU will not be met.
Kate O'Connell (Dublin Bay South, Fine Gael)
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It is balanced elsewhere. I understand that.
Mr. Brian Carroll:
It is balanced elsewhere and contributes to reducing real emissions globally. The ETS is tightening over time. It will become increasingly expensive to buy one's way out.
The number of credits available is reducing continually. Enterprises make commercial decisions but a point will come when it will become more expensive when the credits are reduced.
Kate O'Connell (Dublin Bay South, Fine Gael)
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The same principle will still apply if profitability is increased, even if it is reducing the capacity to buy one's way out. With more profit, one can still buy one's way out, despite the narrowing.
Kate O'Connell (Dublin Bay South, Fine Gael)
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My issue with this is that it is very difficult to bring normal people with one. I am referring to everyday people eating, dressing themselves to stay warm and going places. It is very difficult to bring people with one if there is a possibility that a company, through whatever it is producing, can pollute continually and buy its way out. Deputy Cullinane mentioned somewhere in Waterford the last time. There are those who do not have the capacity to change their behaviour because there is no alternative available to them. It is going to be very difficult to bring people with us. The whole point is carbon reduction and decarbonisation. People get that because it is not that complicated. If the Department is telling people to invest in and retrofit their homes, walk to work or buy an electric car while big industry is pumping out carbon, albeit in a way that it is balancing out somewhere else globally, it will be very hard to sell to average people just trying to go about their daily lives. There is not so much choice available to average people.
With regard to the retrofitting, the scene in an urban area is completely different from that in a rural area. I am originally from a very rural part of Ireland. There are many people in homes around my family home that would have regarded the getting in of oil-based central heating as being progressive recent years. They would have moved from turf or wood. I refer to heavy-duty fossil fuel burning. I just do not see how we can convince somebody who is perhaps of retirement age and who might be considering her life expectancy and saying she could be around for another week or 30 years. The position is very different in terms of getting loans to retrofit homes. With regard to the suitability of many rural dwellings, many have lime-based mortar and stone bases that cannot be wrapped in insulation. There are considerable barriers if those in rural Ireland are to apply the same rules as would apply in urban Ireland. Insulation pads cannot just be put on the outside and inside of stone walls. Heat pumps cost a huge amount of money and require maintenance every year. I just cannot see how older people would buy into the idea of investing in this. Practically, the Department is missing a trick here. I can understand the thinking on modern homes and people building new homes but I believe older people in rural areas with homes that will never be suited to standard retrofitting or standard heat pumps will be very much left behind because there is nothing they can do - other than knock the house and start again - to change their behaviour and reduce their bills.
With regard to the increase in the fuel allowance to mitigate against the carbon tax, I agree with Deputy Cullinane. We are back to the point I made at the start. We have to be reducing carbon emissions. If we are subventing the use of carbon to balance against tax, it seems like a style of economics equivalent to moving deckchairs around the Titanic.
Mr. Brian Carroll:
There are a few points to come back on there. The Deputy is right in that there are certain groups of people and certain houses that are more challenging than others. Retrofitting the entire housing stock is a project that is to take place over 31 years. We have made a start. We have targeted 500,000 to be retrofitted by 2030. This will happen in a series of waves over the coming decades.
I did not make a note of the point the Deputy made at the end.
Kate O'Connell (Dublin Bay South, Fine Gael)
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I cannot remember. I moved on to the next set in my head. It was possibly on why people would invest.
Kate O'Connell (Dublin Bay South, Fine Gael)
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There is a subvention.
Mr. Brian Carroll:
I am sorry because I had not made a note of that. That is not to be looked at in isolation. That is a policy measure to make sure poor people are not worse off. There are further supports being brought forward in terms of the warmer homes scheme, which funds the retrofitting of homes in the order of 100%. We cannot get to everyone at once with this. We have to make sure it does not disadvantage poorer people in the meantime. That is the intent.
Kate O'Connell (Dublin Bay South, Fine Gael)
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On methane and agriculture, methane is considered 25 times more warming than carbon dioxide. Has anyone any expertise in this area?
Kate O'Connell (Dublin Bay South, Fine Gael)
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When calculating greenhouse gas emissions, methane, a by-product of agriculture, is considered to be 25 times more warming than carbon. It does not seem to have been taken into account that the effect of carbon is cumulative. Carbon gathers in the atmosphere whereas methane breaks down within a 12-year cycle period. Therefore, the effect of methane is not cumulative. I cannot find anything in the documentation from the Department, the ESRI or the CSO that brings in a variable to take into account the fact that the methane cycle is a cycle within the carbon cycle. I brought this up with the ESRI and the CSO representatives when they were before us. My point is that there is over-calculation of the impact of agriculture on the carbon footprint of Ireland because methane, although it is considered to be 25 times more warming than carbon, is constantly on the move and constantly breaking down.
The British Veterinary Association has done some work on this. New Zealand, which has a similar agricultural profile to ours and the same type of grassland, has recently brought in a variable to account for this. It would be in the interest of heavily agriculture-based economies to examine this area. It appears to me that agriculture is being unfairly blamed based on an over-calculation of the contribution of methane to warming overall. Does anybody know anything about this?
Mr. Brian Carroll:
I am not a scientist. The current national policy position is to have an 80% reduction in carbon emissions from the energy system. That is the policy position the Government agreed in 2014. An approach to carbon neutrality in agriculture was agreed. Within the policy position, we already have differential treatment in respect of agriculture. I also mentioned that the European Commission recognised the limited mitigation potential of agriculture in 2014 and the importance of food security. With regard to framing longer-term targets, all those factors will have to be taken into consideration.
Kate O'Connell (Dublin Bay South, Fine Gael)
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It is not being taken into consideration yet. The global warming potential of methane from agriculture is regarded as 25 times greater than that of regular carbon.
To my mind that is just scientifically incorrect because if we got rid of all methane-producing farm animals - we obviously cannot - in 12 years' time we would have much less methane. However, with carbon, it just continues to build up. Methane breaks down. Agriculture is being unfairly targeted and I wonder why. Is it that there were not strong enough voices at the table when it came to fighting for agriculture over heavily polluting industries?
Food security and sustainable production is fundamental to the Common Agricultural Policy, CAP, programme. It is not just about writing cheques. It is obviously key to us all eating and surviving. There seems to be an imbalance in the approach to agriculture versus heavily polluting industry. I just do not think Ireland is being represented. If Mr. Carroll does not know about it, clearly there has not been much contact in terms of the New Zealand approach now and the British Veterinary Association's approach. Are we not looking to other countries with a large agriculture industry? We are very lucky to have a large agricultural industry because we have many people minding our environment in rural areas. We are not really doing them justice with our actions.
Mr. Brian Carroll:
I reiterate I am not a scientist but I know that there is engagement, both within our own Department and in the Department of Agriculture, Food and Marine and Teagasc, and an interest in the New Zealand approach. It is not that we are ignoring it or not trying to delve into it to see, in terms of understanding it, the implications of how we frame things in relation to agriculture going forward.
Kate O'Connell (Dublin Bay South, Fine Gael)
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I am concerned when the whole narrative I hear is that we must reduce herd numbers in order to reduce the amount of carbon being produced. It is ultimately carbon but initially biomethane. While some report recommended culling and reducing herd numbers, different approaches can be used to reach the same goal, such as healthier animals producing as much food, vaccinated animals, producing a calf within the optimum period and ensuring they are not sick or dying in the middle of having a calf. We need to maintain efficiency within agriculture. We are number one in dairy and number five in beef genomics. When we consider the major part of agriculture in our overall industry and the importance of agricultural exports for the economy, I am not sure if the current policy direction is fair to agriculture.
Mr. Brian Carroll:
Certainly, in the climate action plan there is no suggestion at all in terms of reduction of herd size. The climate action plan focuses on three things in terms of agriculture. The first the Deputy talked about and that is increasing agricultural efficiency and farm efficiency to reduce emissions. The second is the role of land use, land-use change and so on and the creation of carbon sinks. The third piece is agricultural waste to energy. It is on those three pillars that the climate action plan is based and solely those three pillars.
Kate O'Connell (Dublin Bay South, Fine Gael)
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I thank Mr. Carroll for his time.
Seán Fleming (Laois, Fianna Fail)
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I have a few questions on the receipts from the emissions trading system. Operators have to enter that auction process and the proceeds are distributed among EU member states. Is that correct?
Seán Fleming (Laois, Fianna Fail)
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The Comptroller and Auditor General points out that in the period from 2013 to 2018, we received €367 million. The chart on page 131 of his report indicates that approximately €140 million of it was received in 2018. Mr. Carroll just spoke about the €430 million that was received in carbon tax last year. From the point of view of the Committee of Public Accounts, the departmental officials are here for one purpose primarily. We raised €430 million last year in carbon tax. Ireland received €140 million on the emission trading scheme. Am I correct?
Seán Fleming (Laois, Fianna Fail)
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That comes to €570 million collected in respect of carbon. The Committee of Public Accounts has a simple question. Where did that €570 million go? I do not think Mr. Carroll has the answer to that. That is probably why we are here. As I see it, an extra €90 million is to be raised next year. That will bring it well over €500 million. All that the Department has to offer is that it will not be a hypothecated tax. Will it still go into the Exchequer? Is there proposed legislation to change the current position?
Mr. Brian Carroll:
There is a commitment from Government that all receipts from increases in carbon tax going forward will be ring-fenced for climate action. In terms of this year's budget decision and the €6 increase, there is a €90 million Estimate. The breakdown of what that is to be spent on is there.
Seán Fleming (Laois, Fianna Fail)
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We all got that on budget day. We sat and listened to it.
Seán Fleming (Laois, Fianna Fail)
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I come back to my question on the real reason the departmental officials are here. The debate on the budget for 2020 focused on where the small additional amount of the carbon tax we collect next year over this year will be spent. Ring-fencing can mean anything or nothing from a legal point of view. Can Mr. Carroll guarantee today that the amount collected in carbon tax next year will be spent on climate change initiatives? We can only talk about the increase.
Seán Fleming (Laois, Fianna Fail)
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As in the previous debate all we want from the Department is to know in simple English where the €3.35 billion collected in carbon tax since 2010 has been spent. Either in 2012 a figure was produced showing it for the previous year or at this stage the Department is going to try to assemble the figures in retrospect to show us. They were either documented at the time or they were not. I am not talking about the Department now trying to invent something justifying it seven years on where we have collected and have it. Was it documented? Can Mr. Carroll give me a document today showing where the carbon tax collected in 2010 was specifically spent? Does that document exist?
Mr. Brian Carroll:
I will talk a little bit around it and I will come to answer the question. In the first instance the raising of tax and expenditure are matters for the Department of Finance and the Department of Public Expenditure and Reform. What I am saying is that up to this year, carbon tax receipts went into just general tax revenue.
Seán Fleming (Laois, Fianna Fail)
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Correct.
Seán Fleming (Laois, Fianna Fail)
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For the increase.
Seán Fleming (Laois, Fianna Fail)
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We have heard that.
Mr. Brian Carroll:
The other thing I am saying is that over that period, both in our Vote and across other Votes, there was significant expenditure on climate action programmes. I do not have the accumulated data on that to hand. I know that for this year's Revised Estimates Volume, REV, the Department of Public Expenditure and Reform tried to identify that expenditure and published a table in the REV.
They are part of a green budgeting initiative that the OECD is leading on to ensure a common approach and comparability across countries and that this transparency will increase over time. It is not a question of me suggesting that I can retrospectively construct some link between carbon tax to date and how it was spent. It went into general tax receipts. I can say at the same time that significant amounts of money were being spent through various Votes on climate action. I do not have the accumulated amount that was spent over that period to hand but I know-----
Seán Fleming (Laois, Fianna Fail)
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But Mr. Carroll has the document. He is giving the impression that the document is there. It is just that he does not have it to hand as he speaks. Is the document to hand this evening?
Seán Fleming (Laois, Fianna Fail)
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Could Mr. Carroll help us out here? We want to cut to the chase. Mr. Carroll is now saying that he does not have the document to hand but when I press him on it, he says that the document does not exist. He cannot tell us that he does not have it to hand-----
Seán Fleming (Laois, Fianna Fail)
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We are on the one side in respect of this. We could start by acknowledging that we are starting from where we are, which is that this documentary evidence has not existed in the past, it was not produced each year and let us start producing it now. We just want an acknowledgement that the €3.5 billion collected went into central funds. Mr. Carroll is stating it. We know that. I have seen nothing yet to say that the extra €90 million will not go into the same account again. We can all talk about ring fencing but it will go into the central fund as far I understand it. The Minister did not announce on budget day that it would be a hypothecated fund set up like the motor tax fund that was mentioned this morning.
Seán Fleming (Laois, Fianna Fail)
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There was no mention of that. The Minister said that he produced a sheet of paper showing where it is going, which might be fine, but saying it is ring-fenced is an attempt to give an impression that it will go into a separate fund like the social insurance fund when it will not. The Minister never mentioned that. Has he mentioned that it will be a separate hypothecated fund? That has not been mentioned
Seán Fleming (Laois, Fianna Fail)
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It has not been stated that it will be a hypothecated fund. That is where we are.
Seán Fleming (Laois, Fianna Fail)
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When Mr. Carroll said he did not have it to hand-----
Mr. Seamus McCarthy:
If the Chairman looks at the diagram on the screen, he can see that this is, effectively, a report that the Department is required to produce to explain how the ETS funding was used because there is an obligation to use at least 50% of it for purposes that help mitigate greenhouse gases. Effectively, what has been shown there is the amount that was received from ETS auctions each year. What it is reporting is sufficient spending in other areas that make up the equivalent of that. It is not working in the way a hypothecated tax is supposed to work, which is that one raises "X" amount and demonstrates how that amount was used. If moneys go into the Central Fund of the Exchequer, they are funding everything the Central Fund of the Exchequer is funding and spending that is being done separately is just an account of spending that is being done separately.
Seán Fleming (Laois, Fianna Fail)
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I will read the paragraph in front of us on the screen. There is a footnote stating that a European Commission report from 2017 entitled "Analysis of the use of Auction Revenues by the Member States" noted that Ireland is one of the ten member states where revenue raised through the auction of allowances is not earmarked or ring fenced in its budget and that along with the other nine member states, Ireland was also deemed to provide a low level of detail on the application of revenue to projects aimed at reducing emissions. That is why we are here. We want to get to the point where we are not in the bottom league within the EU when it comes to accounting for it. That was stated by the EU two and a half years ago and we are here today not having advanced an awful lot since then. This is all we want to achieve.
In respect of the €570 million that was collected in 2018, the €440 million collected in carbon tax was read out. We also received €140 million in receipts from the emissions trading scheme. We want to bring the public with us. This is the message I am bringing back. We want to bring the public on the right road on this. I am putting the responsibility on the Department as the lead Department in respect of climate change. Revenue will appear before us next week when we can ask it about the revenue and we can talk to the Department of Public Expenditure and Reform but the Department of Communications, Climate Action and Environment is the one deemed to be the climate change Department. All I am saying is that the public gets very cynical when it is told that €570 million was received in 2018 and we cannot document that it went on climate change initiatives. It would make the job of bringing the public around to the idea of an extra tax a whole lot easier if it could be assured that not just a marginal increase in tax but all of the carbon tax was going on climate change initiatives. People would buy into it but when they see that it is just a wheeze and that we are collecting carbon tax but will not really show how it is being spent, it damages the national effort to bring people around on this issue. I worry that it could lead to a backlash against a carbon tax. We saw it with water charges because people just saw them as a mechanism for collecting money and paying for meters. They did not necessarily see them as improving the water infrastructure because they were not connected. One was just to collect money and pay for the installation of meters to a large extent. The people will have a difficulty with the carbon tax. We want all this to be clear, transparent and upfront so that if the public is told next year that €500 million is being collected, it knows it will be spent on climate change initiatives. I have great faith in the Irish people and believe that they will accept that without a quibble but if they are told it is being collected but the Department will only show them where a tiny percentage of it is going, they will not come along fully.
One of the reasons why we have had these hearings relates to when the CSO appeared before us recently. We found it slightly unusual that when it appeared before us, the CSO document stated that some publicly funded supports have a negative impact on the environment. I know there are other objectives relating to fuel poverty. The CSO stated that a subsidy is classified as potentially environmentally damaging if it is likely to incentivise behaviour that could be damaging to the environment irrespective of the importance of other policy purposes. Some people might say it is an academic argument but we all know that if we increase carbon tax, raise money from it and hand some of the proceeds back by way of a fuel allowance, we will increase CO2 emissions by burning oil, gas, coal or turf. The CSO states that this will have a detrimental effect. I know it costs money but the CSO is saying that it would better if the funds collected were spent on the retrofitting and home heating scheme rather than on giving allowances to people to allow them continue to burn fossil fuels. The CSO is saying that some of what is happening here is detrimental to the environment. Is Mr. Carroll familiar with that document?
Mr. Brian Carroll:
I know the argument that is being made. I must say that the intention in giving it back is not to encourage people to keep burning fossil fuels. The intention is to make sure the most vulnerable are not made worse off by the introduction of the carbon tax.
I do not think it can be looked at in isolation. If it is brought in to make sure that people are not worse off, that is different from bringing it in to discourage them from continuing to burn fossil fuels. It has to be understood alongside other schemes, such as the warmer homes scheme, whereby we are trying to retrofit the houses of the fuel-poor and funding that to 100%. That cannot be done all at once. It will take time to do. It will happen over the coming decade and beyond. In the meantime, the intention is that those least able to bear the burden are not made worse off by the introduction of carbon tax.
Seán Fleming (Laois, Fianna Fail)
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We understand fuel poverty, but if more of the money being received can be earmarked, ring-fenced - one can use whatever word one likes - for initiatives that will reduce our dependence on fossil fuels, that will be the ultimate benefit and where we should be trying to get to. We are here to add to the debate. The public should be able to see transparency and accountability in respect of the €500 million in carbon tax that will be collected next year. The Department of Communications, Climate Action and Environment probably has some documentation done, or perhaps each Department has it done, on the Estimates for the coming year. I am just saying this myself - I have not run it by the committee - but it would be a tremendous assistance and of benefit to the public, when the Estimates come before their respective committees next year, to be shown where the more than €500 million that will be collected in carbon tax next year will go on climate change initiatives. It would be a tremendous help to everybody. It would help the Government in its initiative. Some 170 young people were sitting in the Dáil Chamber last Friday. Their generation would receive the benefit. Just collecting the tax and putting it into the black hole where most of it is going is not helping to bring people around. We, the Committee of Public Accounts, want to contribute to that debate. Mr. Carroll understands where we are coming from.
Mr. Brian Carroll:
I do. We are trying to move towards greater transparency when it comes to climate and environmental expenditure. The first step was the table published in the Revised Estimates this year, and the Department of Public Expenditure and Reform's participation in the OECD initiative on green budgeting will increase that transparency over time and it will become clearer exactly how much is being spent on climate action and environmental initiatives.
Seán Fleming (Laois, Fianna Fail)
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Did the State receive any money this year, 2019, under the emissions trading scheme? If it received €140 million, what happened this-----
Seán Fleming (Laois, Fianna Fail)
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The State has received €114 million. There is an obvious question. That was paid by some of the people with the permits who pollute away - by the way, back at European level. Where did that €114 million go this year? Presumably, it went into the Central Fund.
Seán Fleming (Laois, Fianna Fail)
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It was not earmarked for climate change initiatives, despite the EU telling us in a report two and a half years ago, "Along with nine other member states, Ireland was also deemed to provide a low level of detail on the application of revenue to projects aimed at reducing emissions." Two and a half years on, we have another €114 million this year plus last year's €114 million and no breakdown. The EU told us two and a half years ago, "Boys, you are not doing your job", and we are carrying on. Somebody needs to put a little bit of pressure on the system to be more open and transparent. I am sure this is a good initiative, but we see this silo approach. Revenue collects the tax and the Department of Public Expenditure and Reform does the revenue. The Department of Communications, Climate Action and Environment is one Department. The reason we are talking to officials from that Department and not the former or Revenue is that the latter is the Department with the word "climate" in its title. That is why we are trying to assist it in strengthening the case it wants to make at Government level. That is why we are here today - to assist the Department of Communications, Climate Action and Environment. I am speaking personally at this stage, and the committee will have to agree with any recommendations we make on this matter, but if we come out with strong recommendations in a positive manner, it will be with a view to increasing accountability and traceability and people's acceptance of the need for this initiative. They can only accept it if they know what is going on. I apologise to Deputy Connolly. I have done a little solo run.
Catherine Connolly (Galway West, Independent)
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When was this chapter published by the Comptroller and Auditor General?
Catherine Connolly (Galway West, Independent)
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Was there a meeting between the Department of Communications, Climate Action and Environment and other Departments on the final recommendation to act on this report?
Catherine Connolly (Galway West, Independent)
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No, what action was taken on this one, which is recent? I thought it dated further back. Did the Departments sit down and say, "We need to do something here" or "We need to set up a-----
Catherine Connolly (Galway West, Independent)
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There was a specific recommendation. It applied to other Departments as well. I refer to conclusion No. 9.68: "Given the increasing level of related income and expenditure, it would be timely for relevant accounting officers", etc.
Catherine Connolly (Galway West, Independent)
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Yes, but I am just addressing it to Mr. Carroll.
Mr. Brian Carroll:
As I said, work is under way, I think, across all Departments to try to identify clearly climate and environmental expenditure. I mentioned the table that was published for the first time in the Revised Estimates of this year and that the Department of Public Expenditure and Reform is involved in the OECD's green budgeting. As for our Department, it is much easier to see. We have renewable energy subheads and energy efficiency subheads, so it is easy to identify climate expenditure in our Vote. It might not be as easy to identify it but I cannot comment on what is-----
Catherine Connolly (Galway West, Independent)
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I read the chapter and listened carefully today, inside and outside the meeting room, and the message from the Comptroller and Auditor General is that it is difficult to track the net expenditure. There is a recommendation to the Department of Communications, Climate Action and Environment and other Accounting Officers. We have little time left regarding climate change, and I tire of the debate on changing behaviour by charging people. I have repeatedly said I have a different model and I have seen it work in practice. We are all tired, and I am almost finished. I would have thought there is a need for an urgent meeting on this. If it is not possible to easily track the expenditure, something needs to be done quickly when there is this report from the Comptroller and Auditor General, which is moderate.
Mr. Brian Carroll:
The recommendations on the difficulties of tracking apply across the entirety of Government expenditure. I reiterate that we are moving towards making that more transparent through initiatives such as the table that was published in the Revised Estimate and the Department of Public Expenditure and Reform being part of the OECD initiative on green budgeting. That is a move to greater and greater transparency over time. Just in the way our Vote is structured, it is easy to see what is being spent on dealing with climate change.
Seán Fleming (Laois, Fianna Fail)
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I will make a final observation. This is not on the same issue, but a year ago, we made a recommendation that the Department of Public Expenditure and Reform meet systematically with those Departments in respect of which major Supplementary Estimates are required each year - for example, the Department of Health. The HSE was the first one. It has now set up a health monitoring budget committee within the Department that meets regularly. That was necessary. We are here with representatives of the Department with responsibility for climate change matters. Is it the Department of Public Expenditure and Reform that will pull this together or is it the Department of Communications, Climate Action and Environment? What we see in the public service, and we have seen it in other cases, is that if three or four different people are responsible, nobody is responsible. Is it the Department of Public Expenditure and Reform's job to pull this information together with input from the Department of Communications, Climate Action and Environment? The latter cannot tell the Accounting Officers in other Departments what they should do. To whom do we, as the Committee of Public Accounts, make recommendations? The Department of Communications, Climate Action and Environment is the line Department, but this issue is bigger than just that Department. Have we to go back to the Department of Public Expenditure and Reform on this?
Seán Fleming (Laois, Fianna Fail)
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Mr. Carroll understands where I am coming from. The Department of Public Expenditure and Reform has produced a document for us that we had here on the previous occasion, Staff Paper 2018: An Introduction to the Implementation of Green Budgeting in Ireland, dated December of last year. The Department of Public Expenditure and Reform will probably have the role in pulling this together but we want the Department of Communications, Climate Action and Environment to drive it as well.
Mr. Seamus McCarthy:
Green budgeting is one thing; green accounting is another. If it is just a table at the back of the Revised Estimates Volume, REV, one is looking at the money provided every year. The figures in that are the money provided for spending, and it is only the spending side. I suggest that there needs to be greater transparency around what was spent and on what was raised so that it is broader than the REV. The place where that has to start is the Department of Public Expenditure and Reform. Another point is that the budgeting that is being done now, is budgeting for 2020. Even for the 2019 financial statements, we have missed the boat.
Seán Fleming (Laois, Fianna Fail)
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I accept that.
Seán Fleming (Laois, Fianna Fail)
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On the Estimates that will come before the various sectoral committees -----
Seán Fleming (Laois, Fianna Fail)
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-----the 2020 Estimates have not yet been passed, or the Revised Estimates have not yet been published. They will be published early in the new year after the passing of the Finance Bill and those sorts of items. Is there scope for this matter to be properly kick-started by Oireachtas committees during the Estimates debates?
Mr. Seamus McCarthy:
We have got to start now to deal with all this. For example, take the appropriation accounts for the Department of Communication, Climate Action and Environment. It has two programmes - one is an energy programme and the other is environment and waste management. There needs to be consideration as to whether that is the correct grouping or if it is the correct programme structure. That is something that individual Departments will discuss with the Department of Public Expenditure and Reform. The sooner we start on that work, the sooner we can start taking action and provide better information for a debate that will not go away.
Seán Fleming (Laois, Fianna Fail)
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It is evident that we are all in the same corner. We are frustrated at the lack of transparency. Although we might appear to give the officials a hard time, it is to encourage everyone in the system to move in the direction in which we all need to move. There is no criticism; we are all just a bit frustrated at the slow pace. That is why we called the officials to a special meeting, to highlight it and to give it greater emphasis. Sometimes the Committee on Public Accounts must link it to the tax that has been collected and the expenditure. That is our opening into this, but it is not just about examining the past but also the benefits for the future.
We have concluded our discussion. I thank the officials from the Department of Communication, Climate Action and Environment for their attendance and the Comptroller and Auditor General and his staff. The committee secretariat will contact the officials for any follow-up information that is required and was mentioned.
The next meeting will be with the Revenue Commissioners, during which we will ask about carbon tax. We will discuss Vote 9 of the Revenue Commissioners - Central Fund-related accounts, chapter 17 of the report of the Comptroller and Auditor General on tax compliance interventions, and chapter 18 on tax relief on film production. In the meantime, we will launch the latest periodic report of the committee next Tuesday at 4 p.m.