Dick Roche (Wicklow, Fianna Fail)

I move:

That Dáil Éireann approves the terms of an agreement between Ireland and the European Bank for Reconstruction and Development on participation in the Multilateral Carbon Credit Fund, copies of which were laid before Dáil Éireann on 27 November 2006.

We all recognise that climate change is one of the major global environmental issues of the day. This problem, which affects the entire planet, cannot be solved by any single nation, and certainly not by a nation of just 4 million people. When the Stern report was published recently, it was pointed out that if the UK economy were to close down and to cease all emissions, it would be the equivalent of saving 2% of global emissions. It was argued that rapidly developing economies, such as China, would wipe out the benefit of that saving within months. If all Irish emissions were to stop overnight, the impact of that saving would be lost in a matter of hours.

The challenge of reducing greenhouse gas emissions requires a unique level of international co-operation. Changes are needed in virtually every economic sector. The European Union has taken a lead role in applying the targets agreed at Kyoto for reducing global greenhouse gas emissions. Ireland is fully committed to the Union's policies in this area. Ireland, as a modern developed nation, a member state of the EU and a responsible member of the wider international community, is playing its part in the co-ordinated global response to climate change. Specifically, Ireland has ratified the Kyoto Protocol and is committed to meeting its Kyoto target of limiting greenhouse gas emissions to 13% above the 1990 levels. In that context, Ireland will reduce its projected greenhouse gas emissions from 78.2 million tonnes to 63 million tonnes between 2008 and 2012, which is the indicative period established in the protocol.

Ireland has already put in place measures to reduce its annual emissions by 11 million tonnes, 3 million of which will arise from the participation of power plants and large industry in the EU emissions trading scheme. I have detailed such measures in the House on previous occasions. They are outlined in Ireland's Pathway to Kyoto Compliance, which I published in July and is available in the Oireachtas Library. Ireland is fully committed to and supportive of the EU emissions trading scheme. The Government agrees with the Stern report that the scheme has the potential to become a global carbon trading system. Ireland is committed to purchasing a further 3.6 million tonnes in credits under the Kyoto Protocol, if necessary. A range of other commitments will further reduce Ireland's emissions between now and 2012. The commitments in question have been announced in the Green Paper on Energy, in Transport 21 and in budget 2006. We can anticipate that some further changes will be made in this area in the next few weeks.

It is worth recalling that between 1990 and 2004, Ireland successfully decoupled its economic growth from its growth in emissions. Commentators often overlook the reality that Ireland's emissions grew by 23% in that period, whereas its economy grew by almost 150%. Ireland is an exemplar of the point made in the Stern report that economic growth does not need to be retarded by a commitment to Kyoto. A country and an economy can grow while remaining committed to Kyoto. I suggest that the economies which will develop most in the next few years will be those which are committed to Kyoto. Ireland was one of the first EU member states to submit its 2008-12 national allocation plan. Ireland's proposals in that regard are known as its NAP II proposals. As Deputies are aware, the European Commission yesterday accepted Ireland's NAP II proposals, subject to any amendment notified to the Commission before 31 December next.

I am seeking the approval of the Dáil for the terms of a contribution agreement between Ireland and the European Bank for Reconstruction and Development in respect of Ireland's participation in the multilateral carbon credit fund. We had a good discussion on the proposal at the Joint Committee on Environment and Local Government. There are two separate tranches to Ireland's participation agreement in this fund, the first which relates to a contribution of €5 million to the project-based element of the fund and the second of which relates to a contribution of €15 million for the fund's green investment scheme element. I will explain both of the tranches in more detail after I have outlined the background to the proposal before the House.

As I have said, Ireland has been able to stabilise and reduce its greenhouse gas emissions. In 2001, Ireland's emissions were 27% above their 1990 levels, but by 2004 they had been reduced to 23% above their 1990 levels. We have some more work to do before we can reach the target of 13%, which we intend to do between 2008 and 2012. Ireland's compliance with its Kyoto commitments will be assessed during that key period. Ireland will reduce its greenhouse gas emissions by an average of 14.6 million tonnes in each year during that period, by means of a combination of measures which have been implemented; participation in the EU emissions trading scheme; and the use of the flexible mechanisms in the Kyoto Protocol to purchase allowances. The Government has capped the purchasing requirement at 3.6 million allowances per annum, or 18 million allowances in total over the entire period between 2008 and 2012. The total reduction that is necessary for Ireland is 15.2 million tonnes. As Ireland has accounted for 14.6 million, the remaining gap is just 600,000 tonnes. Further measures are being put in place, particularly on foot of initiatives outlined in the Green Paper on Energy. I do not want there to be the slightest doubt that we will bridge the remaining gap and meet our Kyoto commitment.

The projections on which these figures are based were published in March 2006 and they underpinned separate Government decisions about the size of the burden to be taken on by firms in the emissions trading scheme. The Government has decided that the emissions trading sector will reduce emissions by 3 million tonnes per annum between 2008 and 2012. These decisions underpinned the preparation of Ireland's national allocation plan for 2008-12. The Commission yesterday published its assessment of the first ten plans submitted to it by member states, including Ireland's plan. The Commission accepted Ireland's NAP II programme. Not all member states are in our happy position. The Commission has started infringement procedures against Austria, the Czech Republic, Denmark, Hungary, Italy and Spain for not submitting their NAPs on time. However, the Commission is seeking adjustments, as it has with all other NAP II submissions. The Commission has proposed an average reduction of 7% across all member states. In Ireland's case, the reduction demanded is lower, at 6.4%.

The end game has still to be played on this. The Commission's decision should therefore be seen as a stage in the process. The decision allows us the opportunity to resubmit our national allocation plan for further consideration by 31 December. The Commission believes we have not yet made sufficient progress in our arrangements for Government purchases of allowances under the flexible mechanisms of the Kyoto Protocol. This is what we are addressing today. This motion is to allow the first purchases to be made. I have already indicated my intention to publish the carbon fund Bill shortly.

The Commission had much more fundamental concerns with other member states' plans. It was clear many of them over-allocated to their industries in the first phase of emissions trading, and the 2005 data for actual emissions proved this. In Ireland's case, however, the 2005 data proved that we had allocated correctly, and the Commission has acknowledged this. The basic principles of our plan are recognised by the Commission as being sound. There will be extensive dialogue with the Commission in the coming weeks before we finalise the plan. The outstanding issues can be met with relative ease.

The purchase of carbon credits is a legitimate, practical and logical option under the Kyoto Protocol. The purchase of carbon credits is a key part of the Kyoto arrangements. A country or a company producing over its target of carbon emissions can either reduce its emissions or buy them from another state or company that has spare credits. This provides the motivation to save credits, as they have a value and can be transferred. The Stern report discusses the urgency to go global with this mechanism. Much of the analysis of the Stern report is specifically about the economic value of saving carbon. The flexible mechanisms are not only important to Kyoto parties. They are also very important to developing countries as they attract investment in modern clean technology. This was very evident at the recent meeting of the parties to the protocol in Nairobi. Measures to promote investment through the clean development mechanism in the least developed countries represented major progress at the conference.

The "Nairobi Framework", announced by the UN Secretary General, aims to use the expertise of the main UN development agencies to leverage greater funding for African countries, ensuring the benefits of trading in carbon is shared with the world's poorest nations. In Nairobi, Sir Nicholas Stern repeated the key messages of his recent and much-acclaimed report. He stated that each country should find the best mix of measures to meets its Kyoto responsibilities, including buying credits. He also repeated the point that using carbon finance to accelerate action in developing countries is an urgent priority for international co-operation on climate change. It is also a part of the moral responsibility of the developed world to assist, especially those countries which are energy deficient. Such investment not only helps to reduce global greenhouse gas emissions, but also contributes to sustainable development priorities of project host countries.

If purchasing a carbon credit is the most efficient option, it is odd that some who say they endorse the Kyoto Protocol contest the validity of using this mechanism to assist in meeting Ireland's Kyoto targets. Purchasing carbon credits is provided for in the Kyoto Protocol. It has been specifically identified as a key mechanism by Sir Nicholas Stern, Tony Blair, the EU Commission, Al Gore and Kofi Annan. It was singled out and praised by the president of the Nairobi conference. Ireland will purchase a maximum of 18 million allowances or 3.6 million allowances for each year of the commitment period. Ireland will certainly not be the only EU member state to do so. In fact, we will be one of the very small players in the market. National allocation plans that have been submitted to date show that EU member states alone are likely to purchase up to 500 million allowances to meet their commitments. In Nairobi, it was suggested the figure might even be higher.

While some have fumed at the idea of buying credits, they have been less than forthcoming in exploring the full economic and social consequences of not doing so. If industry was forced to carry the full burden, the consequences could be very severe. Existing Irish industries would have to carry a huge economic burden. Ireland would become an even more costly place to locate business and jobs. Heavy energy users would face particular difficulties and Deputy O'Dowd mentioned two examples in his constituency. The cost base of all industries would rise, electricity prices would be further inflated and domestic producers would face undercutting from imports. Who would benefit from that? Yet that is the precise consequence of the rigid approach being advocated by some people.

The agreement that I propose to sign with the European Bank for Reconstruction and Development, subject to the approval of the Dáil, is to invest €20 million in the new multilateral carbon credit fund offered by that bank in conjunction with the European Investment Bank. As Deputy Cuffe pointed out, this fund is particularly virtuous as it is ring-fenced. Ireland will invest €20 million with the bank. The bank will use its expertise in project investment in eastern Europe, and its prior experience with carbon fund management, to secure contracts for projects to reduce emissions in return for emission reduction credits. These projects will be fully validated and accredited by the UN supervisory bodies, and the credits will only be issued for verified emissions reductions.

There are two distinct elements to the fund. The first is the project-based element. I propose to invest €5 million in this element for projects eligible under either the Kyoto Protocol joint implementation mechanism, or the clean development mechanism. The green carbon fund element will allow countries to sell spare Kyoto allowances to other countries in return for investment from the fund. This is a government to government transfer. Ireland will invest €15 million in this part of the fund. Allowances can only be exchanged for verified emissions reductions. This was a concern that came up repeatedly at yesterday's committee, so I will emphasise it again. All of our investment in these funds will be directed towards good, environmentally-sound projects that will deliver verified emission reductions.

The price of credits was also mentioned yesterday. The bank envisages a price range of between €5 and €10 for projects in the fund. This is an exceptional price and that is why it is important to secure early investment in the fund. If we get agreement today, I can do so tomorrow. We heard some speculation at the committee that carbon prices may rise to very high levels. If one believes that the price of carbon is going to rise threefold or more from its present level, surely prudence and common sense dictate we move now to take advantage of the low-cost opportunities presented by this investment.

I thank the members of the joint committee for the consideration they gave the motion yesterday. I commend the motion to the House as an important contribution to Ireland's commitment to address global climate change and our responsibilities under the Kyoto Protocol.

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