Eamon Ryan (Dublin South, Green Party)

I welcome this opportunity to make a further statement on recent developments on the climate change issue, which are of crucial significance for this country. The Taoiseach was right last week when he said that the proposed changes present a huge challenge for Irish society and our economy. As the Taoiseach also said, these developments present us with an opportunity to address the necessary changes to create employment, cut back on our fossil fuel bill and protect the environment.

This is a complex subject which has been made more complex by last week's announcement from the European Commission. We are dealing with a series of policy measures that work in a variety of different markets, often with target figures that make it difficult to assess the precise implications of what is happening. To begin with, I will try to explain some of the issues and implications as I see them. A year ago the European Commission came out with what it called the 20-20-20 target. In effect, it meant that the European Union would act coherently to reduce greenhouse gas emissions by 20% from 1990 levels by 2020.

The policy also seeks to increase our energy efficiency by 20% in the same timeframe, as well as developing 20% of our energy resources from renewable power supply systems. Some people have criticised that target as being too simplistic. Economists may ask how one can set such a simple target which does not reflect the complexities of the real world. It is a good target, however, because it covers essential developments such as climate change and the key responses to it in renewables and energy efficiency. These 20% targets have been set not as precise limits but as targets that we can then exceed.

As Members of the House will be aware, these strategic targets were approved by heads of government at the European Council in March last year. The Taoiseach and other EU heads of government signed up not only to that 20% reduction but also to a further 10% reduction if we can achieve international agreement — which I believe we must and will achieve — as part of the United Nations process that has led from Kyoto to Bali last November and through to Copenhagen, where we hope there will be an agreement in 2009. Therefore the European Union is committed not just to that 20% reduction in greenhouse gas emissions but also, subject to international agreement, a further 10% reduction.

The proposals launched last week set out the mechanisms, suggested by the Union, by which each country has to achieve the target. They recognise that in order to reach the 20% target for reducing greenhouse gas emissions we must get a 14% reduction from where we were in 2005. By that year we had already achieved a 6% reduction but we need to achieve a further 14% to reach the 20% target. The EU is also proposing that the further 14% reduction would come from two sectors in the European economy. The first sector comprises large-scale emitters such as big power generators, steel companies and car manufacturers. They are in what is known as the emissions trading system whereby they have an allocation to emit any carbon. If they exceed that they must pay for it. The bulk of the 14% reduction will come from that heavy industrial sector, which will see a 20% reduction in the period 2005-2020.

The non-emissions trading sector, including small businesses, individual residences, transport and agriculture, will have to provide a 10% cut in the 15-year period from 2005 to 2020. Relatively, the agriculture, transport and small business sectors of the economy will take on a smaller share of the reductions that must be made.

The European Union also has a proposal to share the reductions in the non-heavy industrial sector. It proposes a fair and effective system which is close to what we could have expected within our national climate change strategy regarding the dividing of resources. Under the proposal, countries such as Bulgaria and Romania, the economies of which have not developed similarly to ours or those of other wealthier countries, can further increase their emissions by 20%. Member states with a large GDP which have undergone significant economic development and which have that ability to do so, will make significant reductions. For example, Ireland, Denmark and Luxembourg will reduce emissions by 20% in sectors such as agriculture, transport and energy rather than in heavy industrial sectors. These broad targets have been set and frame the various responses to deliver them.

The European Union's other significant announcement last week related to how member states would meet the targets. The proposed changes concern three main areas, the first of which is the rules and regulations of the emissions trading system for large industrial polluters. By and large, the proposed changes are positive. To date, the system of trading has been based on existing power supply companies or cement factories, for example, having an allocation based on their historical emissions and a right to emit carbon. Many argue that is inefficient and unfair and a much preferable system would be to auction that right. Companies will have to bid for the right to manage this. Rather than each national government issuing the allocations, whether they are auctioned, the Union suggests it should be done on a centralised European basis. The intention is to use the auction system on a stepped up basis in order that it can be gradually introduced. There is a question about whether it should apply to industries which might leave the Union were it applied for other markets, resulting in their products having to be imported. This is known as carbon leakage and it would mean no reduction in carbon, as the industry would only be transferred to another market. The Commission is seeking to be flexible about this and by 2010 or 2011 hopes to introduce a more flexible system to prevent carbon leakage. The movement towards an auction-based ETS to be introduced gradually is a positive and progressive development.

A more significant development concerns renewable energy. The Commission has outlined in more detail how the 20% renewable energy target will be met by 2020 as part of the overall 2020 package. This is complex because it involves many years and figures but the Commission states Ireland is almost halfway there and a further 11% increase in renewable energy supplies is needed to meet the 2020 target. On a rational and fair basis, the Commission will set different percentage targets for each member state in order that the European Union as a whole meets its overall reduction target. In our case, 16% of our energy supply must come from renewable sources by 2020. That is in line with the Government's policy in this area but we will not stop when we achieve that target. People might ask why Ireland which has significant renewable resources through wind and wave power has only been set a target of 16% and not a higher target. Currently, 5% of our energy supply comes from renewable sources and, in 13 years, Ireland is expected to treble its renewable energy power supply. Energy is used primary in three areas, with one third devoted to power generation which tends to receive all the attention, one third to heating which is not discussed as much because it is not evident to the public and one third to transport. There is huge potential in the electricity area. A recent major all-Ireland study stated we could achieve more than 40% of our renewable energy target by 2020, which would be ahead of the curve in international terms. We could be a world leader in this regard. However, it is more difficult in the other two areas.

With regard to heating, the issues are developing the infrastructure quickly and the supply system and raw materials available. How can our land be used most effectively to provide a wood fired heating supply or waste heating resources? A significant increase is needed in this area to meet the target. Likewise, we have a particular difficulty in the transport sector because our transport use is increasing rapidly every year and the development of bio-fuels will not be easy. Bio-fuels is a difficult environmental issue in the context of developing alternative bio-fuels while protecting the environment and using resources effectively.

One of the significant developments in the Commission's announcement last week, which is positive, is that for a bio-fuel to qualify as a contributor to the overall target, it will have to demonstrate it is not produced in an unsustainable manner in order that, for example, a rainforest is not being chopped down, or a natural habitat is being destroyed or wetlands or existing forestry which act as a carbon sink are not being used to produce the energy. Key environmental controls will be put in place to ensure bio-fuels that come from those sources cannot be used, which is very positive. The Commission has also stated bio-fuels will have to lead to at least a 35% reduction in carbon emissions compared with petrol or diesel. There is a great deal of evidence to show certain bio-fuels may not result in a significant carbon reduction and the same amount of energy may used in their the production as they produce. The European Union and the Commission held hard fought discussions about what the percentage reduction should be. Some argue that it should have been higher but that is what the Commission has agreed regarding the level the market should ensure.

The third response to the overall targets set out by the Commission relates to carbon capture and storage. This technology is not available commercially and is still at research stage. It relates to taking the carbon emitted by a coal fired plant or a peat or gas plant and storing it during power generation underground rather than releasing it into the atmosphere. This is a difficult technical and economic issue. It will be difficult commercially to generate power effectively using this technology. There are also various environmental and safety issues about how to store the carbon emissions. The European Union committed €20 billion to develop 12 demonstration projects by 2015 to ascertain how the technology might work. If it can be cracked on an economic basis, there is huge potential for significant reductions and to generate electricity from another diverse source which increases our security of supply.

The Government's response to the European Union's proposal has been positive in its communications. We have reiterated that the Government is committed to the 20% reduction target, to which it signed up at the Council of Ministers last June, and the 30% reduction target if there is international agreement. The Taoiseach and the Government have explicitly reaffirmed Ireland's interest in meeting such targets within the Union. It was correct for us to question the testing and to provide an assessment to make sure the system devised was fair, effective and efficient. Every other country has done so in examining its responses.

I believe every country has expressed agreement with the overall target while raising concerns over certain aspects. The UK may be different from us in saying it has difficulties with regard to renewables because, while that country's renewables target of 15% is similar to ours, it will be much harder to achieve in countries with a smaller landmass, larger population and fewer natural resources than Ireland. Other countries will raise different concerns but given that the European Union has committed to this in such a vociferous manner in Bali and elsewhere we will see agreement on the measures and, if there is an international agreement, we will seek to go further with a 30% reduction.

The mechanism will be tested and scrutinised. The Commissioner for Energy, Mr. Piebalgs, stated this week there would be flexibility between countries in respect of the renewables target but that we cannot shift the overall target to which we have committed. Thus, if any country seeks changes, another country will have to agree to take more. Such an agreement will be difficult to achieve, so we have to assume the system will be introduced as proposed. In my opinion, the Commission has taken a balanced approach. It is right that certain technical details should be teased out, such as our high population growth rate relative to other European countries and the relationship between GNP and GDP, without questioning the overall direction and intent of the Union.

Those who are scared of the climate change process have in the past cast doubts on the science, claiming for example on the basis of Internet research that sunspots are to blame. That argument is not heard as much now because it simply is not tenable.