Pat Deering (Carlow-Kilkenny, Fine Gael)
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8. To ask the Minister for Public Expenditure and Reform his views on whether the public spending code adequately takes carbon impact into account when decisions are being made on capital projects; and if he will make a statement on the matter. [53194/18]

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I thank the Acting Chairman for allowing me in. I apologise for not being here earlier but my question came up earlier than I expected. I have come from a meeting of the Joint Committee on Climate Action which has been very busy in recent weeks. Does the Minister believe that the public spending code takes adequate account of carbon impact on capital projects in the coming years? The Project Ireland 2040 plan announced some months ago was very ambitious. Does the spending code take into account the ambitious projects in that scheme?

Paschal Donohoe (Dublin Central, Fine Gael)
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Facing challenging and legally binding greenhouse gas emission reduction targets, it is imperative that the assessment of public investment projects includes an appropriate valuation of the cost that society will bear in dealing with these emissions.

Under the national mitigation plan, my Department committed to “undertake a review of guidance on public expenditure appraisal and evaluation to ensure their suitability to capturing key costs and benefits of climate measures”. This review concluded that the model used for pricing carbon in the public spending code is outdated. As such, in 2018 my Department published a consultation paper proposing significant reforms of how carbon is priced in the appraisal of capital projects.

The consultation paper proposed that future greenhouse gas emissions should be valued according to a shadow price of carbon that is based on the estimated marginal cost that will be faced by society in achieving Ireland’s legally binding 2030 greenhouse gas emissions target. In practical terms, this means a new shadow price of carbon for emissions not covered by the emissions trading scheme of €32 per tonne in 2020, rising to €100 per tonne by 2030. Beyond 2030, it is proposed that the shadow price of carbon will rise by 5% a year, reaching €265 by 2050. For any elements of projects that will affect emissions in sectors of the economy covered by the EU emissions trading scheme, ETS, the shadow price of carbon will continue to be based on the estimated future value of allowances in the ETS.

To be clear, the shadow price of carbon applies only to the public spending code which covers the evaluation of direct Government investment. It is not a direct cost borne by consumers, it is not a carbon tax, nor does it imply any future direction for carbon taxes.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I thank the Minister for his detailed response. The greenhouse gas emissions challenge will be one of the biggest challenges of our generation as we try to reach our 2030 targets and beyond. Are the projects which have been announced, including some of the large, very ambitious projects included in Project Ireland 2040, still under the existing emissions targets or must they be repriced in future?

Paschal Donohoe (Dublin Central, Fine Gael)
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We will have to make decisions about projects when we consider the revised public spending code. I will decide the elements of the revised code shortly. I expect that when we do that with many of the key projects in Project Ireland 2040, particularly in the area of public transport, the case for doing them will become only stronger, especially given that the plan already has such a significant allocation for climate change related funding.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Will the action plan for climate change that the Minister for Communications, Climate Action and Environment is to announce in coming months tie in to whatever revised estimates that the Minister for Public Expenditure and Reform may have to announce? I am glad to hear the Minister's commitment to the projects that are already there. It serves to re-emphasise a point I would make myself, namely, that the large infrastructural projects are needed to join up the dots for things that were missing during the lost years of the recession.

Paschal Donohoe (Dublin Central, Fine Gael)
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That is the case. We will complete the work we are doing on the public spending code. The public consultation on this only finished on 14 December. The Minister for Communications, Climate Action and Environment, Deputy Bruton, is setting quite the pace in looking to publish the new climate action plan. I will do my best to try to keep up with that and ensure that any decisions we make on the public spending code, which must be integrated from a policy perspective, will conclude at the same time as the work being undertaken by the Minister, Deputy Bruton.