Tuesday, 16 November 2021
Ceisteanna - Questions - Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions
Public Spending Code
63. To ask the Minister for Public Expenditure and Reform if he will provide information on planned changes to the public spending code against which proposals from Departments and State agencies will be appraised in respect of the need to comply with the aims of the climate action plan and sectoral carbon budgets; and if he will make a statement on the matter. [54955/21]
We cannot legally meet the binding targets of net zero unless we radically change how we do things. The Department of Public Expenditure and Reform is the parent Department for the national development plan, which he has stated will see us spending an additional €116 billion over the next ten years, during its lifetime, on major infrastructural projects. The legal, moral and existential demand to slow and arrest climate change should be at the heart of every project his Department promotes. How does the Minister plan to change the public spending code to align it with our climate goals?
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.
Additional information not given on the floor of the House
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.
When will that work conclude? This is critical. I am not sure the Minister and everybody in his Department, or indeed the Minister for Finance and his Department, understand the absolute centrality of their Departments in meeting our climate change ambitions. The Minister mentioned that the reference cost of carbon will have to change again if we are to align the national development plan and the Government's ambitions more generally with our climate goals. When precisely will that happen?
Fiscal policy, tax spending and climate are all intertwined, and the Minister's Department will have to get used to saying "No" to projects it would routinely have passed and promoted until relatively recently. On that note, it would be useful to understand how involved his Department was in the making of the recently announced carbon budgets.
It is important to say that the recently published national development plan, NDP, contains a comprehensive set of climate methodologies, against which all major capital investment projects will be assessed. My Department and that of the Minister, Deputy Eamon Ryan, worked very closely and collaboratively in the preparation of the NDP in that regard.
As I set out in the original reply to this question, we have now considerably strengthened the greenhouse gas, GHG, emission reduction targets to 51% by 2030. As the Deputy has acknowledged, that means that the public spending code must be updated to reflect this enhanced ambition and my Department has a full programme of works to ensure that the code remains fit for purpose. Since the projects initiated will give rise to emissions over their lifetimes, the assessment of public investment projects should include an appropriate valuation of the cost that society will bear in dealing with the emissions that a project will give rise to.
With respect, that reply is the kind of “blah, blah, blah” that Greta Thunberg has accused others of. We must be more precise and how we describe this. I am interested in establishing exactly what kind of metrics the Minister’s Department is going to apply in respect of approving those projects that will be significant in allowing us to meet our carbon reduction and emission goals more generally.
One of the projects, for example, that would allow us to do that which seems to be still on the blocks is the DART+ initiative, which will ultimately take the DART to my home town of Drogheda in the constituency of Louth and east Meath. The project seems to me to be a no-brainer and it strikes me that a strong climate-informed public spending code would see that project being initiated in earnest as soon as is humanly possible. I again ask the Minister when the reference cost of carbon will be changed and updated. We cannot wait until next year or the year after; we need to know now.
I reassure the Deputy that this matter is a priority for my Department. Work on this is ongoing and I anticipate that it will be completed shortly. As the Deputy is aware, a shadow price of carbon is the value that we place on these projected future emissions from projects. I reassure the Deputy as well that when he looks at the national development plan, he will see that we have given an envelope of funding of €35 billion, for example, to the Department of Transport. The Deputy is aware of the overall emphasis in respect of the ratio that we have agreed for spending in this regard, namely, that of a 2:1 ratio in respect of investment in public transport versus investment in road infrastructure. We have also carved out an annual commitment of €360 million for investment in a range of active travel measures during the lifetime of the programme. Therefore, my Department and that of the Minister, Deputy Eamon Ryan, are working closely together. This format does not really allow us to get into the detail, but I would welcome engagement with the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach on the detail of how we are connecting this analysis and how we are assessing the impact of the shadow price of carbon concerning individual projects. It is difficult, however, to get into the detail in this format.