Damien English (Meath West, Fine Gael) | Oireachtas source

I move amendment No. 1:

That Dáil Éireann notes the Fossil Fuel Divestment Bill 2016 as introduced by Deputy Pringle and further notes that:- the Ireland Strategic Investment Fund, ISIF, operates a sustainable and responsible investment policy, published in July 2016, and that this policy specifically focuses on climate change;

- ISIF has limited exposure to fossil fuels within its portfolio;

- the fund has an €800 million allocation to energy, the vast majority of which will be invested in renewables;

- there are significant opportunities in ISIF's potential investment pipeline;

- to date, the fund's renewable energy investments include:

- €44 million for the €500 million Dublin waste to energy project which will assist Ireland meet EU waste targets and the waste processed will be utilised for energy recovery and development of a district heating scheme;

- a €35 million commitment to NTR's onshore wind fund;

- investment in the BlueBay SME credit fund, which fund has made loans to Irish headquartered renewable energy developers and to a designer and manufacturer of high power density high efficiency power supplies;

- €85 million in forestry, a net positive contributor to managing emissions;

and that Dáil Éireann concludes that because of its progressive record in these matters ISIF's investment options do not need to be underpinned in statute and, therefore, declines a Second Reading of the Bill.

As the House will be aware, responsibility for Ireland's energy and climate action policies is within the remit of the Minister for Communications, Climate Action and Environment, but as the Bill seeks to amend ISIF's investment approach through an amendment to the National Treasury Management Agency Acts, the Minister for Finance, Deputy Michael Noonan, is leading the Government's response to it. As he is not in the country today, he cannot take the Bill.

The intention behind the Bill is well understood by both the Minister for Finance and his colleagues in government, including the Minister for Communications, Climate Action and Environment, Deputy Denis Naughten. The publication and introduction of the Bill are useful in that they allow the House to have a constructive discussion on the issue of fossil fuels in the light of Ireland's climate and energy priorities. These priorities, in turn, govern Ireland's national decarbonisation strategy in line with its climate change commitments. In addressing these matters we must never lose sight of the continuing reality of our dependence on fossil fuels in meeting our energy and transport needs. The Government considered the Bill at its meeting this week.

In doing so, it has constructively engaged with the issues raised in accordance with its responsibility to address and evaluate proposed legislation irrespective of whether said legislation is initiated by the Government or a Private Member, as in this case.

The Government understands the intention behind the Bill and I commend Deputy Pringle on his work in preparing it and having it published last November. The Government has agreed that the best approach for Ireland is to propose a reasoned amendment to the effect that the Bill should not be read a Second Time. This is due to the fact that the Bill poses risks to ISIF's ability to support the transition of our economy to a low-carbon one as well as to employment and our economy overall. In addition, the Bill gives rise to a number of difficulties for ISIF, which I will address shortly. ISIF has already adopted a progressive approach towards fossil fuel investments and therefore its investment options do not need to be underpinned by statute in the manner proposed.

As Deputies are aware, the Bill has been published at a time of ongoing developments in the area of energy and climate policy nationally and internationally. In considering the intentions behind the Bill, there must also be careful consideration of its wider policy implications.

Ireland is heavily reliant on fossil fuels, accounting for 91% of all energy used in 2015. This is broken down between oil at 48%, natural gas at 27%, coal at 10% and peat at 6%. Ireland's climate and energy priorities govern the national decarbonisation strategy in line with our climate change commitments. The issues of decarbonisation and the long-term transition towards a low-carbon economy are central to the Paris Agreement, which was agreed by more than 195 countries and parties at COP 21 in 2015 and has been in force since 4 November 2016. The extent of the challenge in Ireland is well understood by the Government and is reflected in the 2014 national policy position on climate action and low-carbon development and the Climate Action and Low Carbon Development Act 2015, both of which are key elements in the effort to progress the national low-carbon transition agenda.

Ireland's national policy position, published in April 2014, sets out a long-term vision of low-carbon transition. As envisaged by the position, the evolution of climate policy will be a dynamic and iterative process based on the adoption by the Government of a series of national mitigation plans and national adaptation frameworks to 2050, with the ultimate objective of incrementally achieving the national transition objective. The 2015 Act provides the statutory basis for our national transition. Similarly, the energy White Paper, Ireland's Transition to a Low Carbon Energy Future 2015-2030, which was published in December 2015, sets out the vision for 2050 that greenhouse gas emissions from the energy sector will be reduced by between 80% and 95% compared with 1990 levels. This demonstrates the consistency and coherence between Ireland's climate and energy policies.

The energy White Paper sets out how the transition away from fossil fuels will take place while making clear that oil and gas remain critical between now and 2035. The White Paper also sets out the potential share of fossil fuels in a number of carbon reduction scenarios under which fossil fuels continue to have a key role in Ireland's energy mix even in a significantly decarbonised energy sector. In light of this, continued investment in fossil fuel-related technologies and businesses is a necessity.

In properly considering this Bill, we must take full account of Ireland having a high energy import dependency, with over 88% of our energy needs met through imports in 2015. Although the Corrib gas field will reduce our import dependence in the short term, Ireland is expected to be reliant on the UK for approximately 85% of our natural gas by 2025. Ireland imports all of its oil supply, including crude oil, which is refined at Ireland's only refinery at Whitegate in Cork, and refined oil products - petrol, diesel, kerosene, heating oil etc. - the majority of which are provided from the UK. This means we have a significant security of supply dependency on imported fossil fuels, particularly from the UK. Although Ireland has an excellent relationship with the UK in terms of energy, it is possible that this could be complicated by Brexit in the coming years. In order to ensure continued secure supplies of energy in the future, investment from ISIF in strategic energy infrastructure may prove necessary. This Private Members' Bill would preclude such investment.

The Bill's definition of a "fossil fuel company" is of significant concern. It means a company whose business either wholly or partly engages in the exploration, extraction, refining, processing or delivery of fossil fuels, those being geological deposits. This definition would appear to encompass a wide range of companies, including Bord na Móna and the National Oil Reserves Agency, NORA. It would also appear to capture any local, national or international business involved in the delivery of fossil fuels. This could include local distributors of oil, gas, coal and peat products to homes and businesses across Ireland.

This definition would prevent ISIF credit and other equity funds from supporting Irish SMEs that had involvement in these sectors. It would also appear to restrict investment by ISIF in companies developing innovative technologies that could improve the energy efficiency of fossil fuel-based processes. Furthermore, development of technologies that could lead to improved air quality by reducing the emission of particulates may also be restricted.

The old National Pensions Reserve Fund, NPRF, transitioned in December 2014 into ISIF, which has a statutory mandate to invest on a commercial basis to support economic activity and employment in Ireland. All ISIF investments since then comply with this double bottom line mandate and the fund's sustainability and responsible investment policy, which sets out key principles for responsible investment.

Historically, the only category of investment that was specifically excluded from the NPRF or ISIF was cluster munitions in accordance with the Cluster Munitions And Anti-Personnel Mines Act. However, the NTMA is conducting a review of the exclusion of categories of investment from ISIF as a whole. This review is expected to be completed during the first quarter of 2017. The Government welcomes this review and believes it is appropriate that we await its outcome.

An example of ISIF's responsible approach was the decision to divest from all legacy investments in tobacco manufacturing on the basis that the risks associated with same outweighed any potential commercial return over the long term. This divestment was completed in December 2016.

The review of the exclusion of categories of investment includes a case-by-case analysis of all ISIF energy holdings in order to assess the sustainability and the investment case. The fund acknowledges that those companies that are most exposed to and least prepared for transition to a low-carbon economy may be candidates for divestment. As part of the implementation of ISIF's mandate to invest on a commercial basis to support economic activity and employment, the transitional global portfolio of the NPRF is being sold or divested over a period of years in order to provide capital for investment in Ireland. As such, the fund's exposure to the energy sector has reduced substantially since its establishment and will continue to reduce as the global portfolio is divested over the coming years. Such investments should be considered in the context of ISIF's Irish portfolio and its significant commitment to renewables.

ISIF's investment strategy is aligned with Government policy and the State's commitment to make the transition to a low-carbon, climate resilient and sustainable economy. The strategy sets out ISIF's €800 million energy allocation, which will include a significant element of renewables investment. To date, renewable energy investment commitments include €44 million for the €500 million Dublin waste-to-energy project; a €35 million commitment to National Toll Roads, NTR's onshore wind fund; investment in the BlueBay SME credit fund, which has made loans to Gaelectric and Mainstream, Irish headquartered renewable energy developers; and being a cornerstone investor in the Irish Infrastructure Fund, which holds a number of Irish onshore wind assets and forestry and is a designer-manufacturer of high power density high efficiency power supplies. There are also significant further pipeline opportunities.

As part of its ongoing commitment to operate to high international standards, ISIF published its sustainability and responsible investment policy in July 2016, emphasising climate change as part of its investment decision making process. ISIF continually reviews its carbon exposure and the investment case for companies that may not be aligned with the long-term transition to a low-carbon economy.

As currently proposed, this Private Members' Bill would lead to ISIF investments being directed away from supporting the implementation of Government policy and many businesses that are vital to the proper functioning of Ireland's economy and society.

The National Treasury Management Agency (Amendment) Act 2014, which established ISIF, provides that ISIF shall review its investment strategy after 18 months of operation and that, in doing so, shall consult with the Ministers for Finance and Public Expenditure and Reform. This review, which is separate from ISIF's review of exclusions, is under way and issues such as decarbonisation, energy security and Ireland's long-term transition towards a low-carbon economy are being considered. As part of this process, ISIF is considering the investment case for companies that may not be aligned with that transition.

6 o’clock

The Government considers this to be a well-intentioned Bill, and I assure colleagues in the House that we have carefully considered the Bill’s provisions. While the Government shares Deputy Pringle’s ambition of managing the transition to a low carbon economy, we must remain conscious that the transition will require careful management of the policy priorities and issues arising in what is a complex national and international public policy context. In managing these policy priorities, we must legislate cautiously in order not to do more harm than good. The Government is concerned that the current Bill with its inexact definitions could inhibit Ireland’s ability to transition to a low carbon economy by excluding Ireland’s largest investment fund, ISIF, from investing in key pieces of carbon reducing infrastructure. The most obvious example of this is that ISIF would be prohibited from investing in a Bord na Mona wind farm or its other forms of renewable generation capacity.

In light of these concerns and given there are ongoing deliberations in respect of the Government’s White Paper on energy, I respectfully ask that the Deputy would consider withdrawing the Bill at this time. Such a withdrawal would provide an opportunity for further consultation and for research and analysis to be conducted. As stated, this research and work should assess the Bill's wider potential implications, including the negative effects on ISIF's statutory functions, the potential impacts on Irish economic competitiveness and, most important, ISIF's ability to support the transition to a low carbon economy. It would thereby ensure the Bill is measured, targeted and appropriate. Such a withdrawal would also allow for the ongoing developments and deliberations to be worked through.

I wish to highlight the positive steps taken by the Government in the area of energy and climate policy. In this regard the energy White Paper sets out a coherent high level framework for Ireland’s energy transition to a low carbon economy and society and identifies a range of measures and actions to support the aim. In addition to the positive actions by Government, I wish to highlight again the positive steps taken by ISIF in investing in companies which are themselves transitioning towards more climate-friendly renewable strategies. That further emphasises the complexity in reducing the country's fossil fuel dependency while also ensuring energy security. Following evaluation of the proposed Bill and for the foregoing reasons, the Government has proposed a reasoned amendment opposing giving the Bill a Second Reading. I commend the reasoned amendment to the House.

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