Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

The public spending code is the tool the Government uses to evaluate the consequences of capital investment decisions. Every public investment project with a value above €20 million must conduct an analysis of the potential costs and benefits associated with that project, using rules set out by my Department. It is critical, therefore, that the public spending code provide a realistic assessment of the likely climate and environmental consequences of these decisions.

My Department has a full programme of works for the evolution of the public spending code to ensure it is compatible with the Government’s enhanced climate ambition. In the first instance, the priority will be to increase significantly the cost associated with any release of additional greenhouse gases into the atmosphere. Each cost-benefit analysis must provide an assessment of the net impact of the proposal on greenhouse gas emissions. These emissions are then priced according to a schedule of values based on the estimated marginal cost society will incur to reach specific climate targets. Any project that results in greenhouse gas emissions must price these emissions at what it is to likely to cost society to reach our climate targets by adopting an offsetting measure that will reduce emissions.

In 2019, my Department tripled the price of carbon applied in the code. This reappraisal of the cost of carbon was based on the estimated costs associated with achieving a 30% reduction in emissions by 2030. Since then, the Government’s climate ambitions have been considerably strengthened. Ireland now intends to cut greenhouse gas emissions by 51% by 2030 and to become a carbon-neutral economy by 2050, with any remaining emissions balanced by the removal of emissions from the atmosphere. This means the price applied in the public spending code must be updated to reflect this enhanced ambition. In addition, work has commenced with the OECD on evolving further aspects of the public spending code.

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A new model for assessing the emissions impact of infrastructure investment will be progressed to ensure the full range of potential consequences for this type of investment are captured and valued appropriately. This work will consider how such assessments are performed at the moment and what reforms might be implemented to improve these assessments. The project will also examine how investments that may be vulnerable to the impacts of climate change should be appraised.

Finally, work will be progressed on understanding the role of an instrument like the code, in a scenario where net-zero greenhouse emissions must be achieved by 2050 and the role the public spending code can play in the achievement of broader environmental objectives. Ultimately, the objective of this programme of work is to allow the Government to take decisions that are fully informed by the best possible evidence on the consequences of these decisions.

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