Thomas Pringle (Donegal, Independent)
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187. To ask the Minister for Public Expenditure and Reform the reason the revised public spending code recommends that the shadow price of carbon is set at the December 2017 level at €7.29 per tonne in project appraisals up to 2019, in view of the fact that the cost of carbon credits in the EU Emissions Trading System has risen significantly in the past few months to nearly €20; if the recommended shadow price will be revised upwards; and if he will amend the public spending code guidance document E5. [48145/18]

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 include an appropriate valuation of the cost that society will bear in dealing with the increased greenhouse gas emissions a project might give rise to.

Under the National Mitigation Plan, the Department of Public Expenditure and Reform 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 has now been published for public consultation (6 November).

The review concluded that the model currently in use for pricing carbon in the Public Spending Code is outdated. A new model has been proposed that values future greenhouse gas emissions 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 non-ETS emissions of €32 per tonne in 2020, rising by €6.80 a year to reach €100 per tonne by 2030. Beyond 2030, it is proposed that the shadow price of carbon will simply rise linearly by 5% a year.  This means that the shadow price of carbon rises to €128 for 2035, €163 for 2040, €208 for 2045 and €265 for 2050.

In 2019, the price that will be applied to non-ETS emissions is the current value of the carbon tax - €20 per tonne of greenhouse gas emissions. 

For any elements of projects that will effect 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. These values will be calculated according to the average of observed market values from public exchanges. At the time of the consultation papers publication, the projected value of an ETS allowance for delivery in March 2019 was €17.37.

The closing date for this consultation paper is 14th December 2018. Subject to the views received in this process, it is intended that the revised Public Spending Code will apply to all cost benefit analyses conducted from early 2019 onwards.

Thomas Pringle (Donegal, Independent)
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188. To ask the Minister for Public Expenditure and Reform if he will require all projects under the NDP to be appraised using a shadow price of carbon in view of the fact that the current EU Emissions Trading System price of nearly €20 may serve as a guide to assessing the long-term climate impacts of NDP investments. [48146/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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The appraisal requirements for public expenditure projects and programmes are set out in the Public Spending Code. The Public Spending Code is the set of rules, procedures, and guidance to ensure Value for Money in public expenditure across the Irish Public Service. All relevant guidance material and requirements are presented together, through a unified web-portal at/Exchequer funded capital projects under the National Development Plan must be appraised in line with the requirements set out in the Public Spending Code.

The Public Spending Code stipulates that every spending proposal should be appraised carefully but the resources spent on appraisal should be commensurate with the cost of the projects or expenditure proposals. Projects over €5 million should be subjected to an economic appraisal. For projects from €5 million to €20 million, this should take the form of a Multi-Criteria Analysis and projects over €20 million should be subjected to a Cost Benefit Analysis or Cost Effectiveness Analysis. Section E of the Public Spending Code sets out the key technical and parameter values for conducting economic appraisals including the shadow price of carbon.

Shadow prices are used in appraisal where the use of market prices to value the cost of project inputs and outcomes does not reflect opportunity costs due to market failures. The current guidance on how to apply the shadow price of carbon in economic appraisal of projects can be found in Section E5 of the Public Spending Code.

The Public Spending Code is updated from time to time to ensure that it continues to reflect current best practice. It is currently being reviewed. As part of this review, a research paper on the central appraisal technical parameters, i.e. the discount rate, time horizon, shadow price of public funds and shadow price of labour was published in October 2018.

A public consultation on the shadow price of carbon was also published on 6^thNovember 2018 as part of the current review. The consultation presents the results of the Department of Public Expenditure and Reform’s review of the guidance on public expenditure appraisal to ensure its suitability to capture key costs and benefits of climate measures as committed to under the National Mitigation Plan.

The Department’s review concluded that the model currently in use for pricing carbon in the Public Spending Code is outdated. A new model has been proposed that values future greenhouse gas emissions 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.

The closing date for this consultation paper is 14th December 2018. Subject to the views received in this process, it is intended that the revised Public Spending Code will apply to all economic appraisals conducted from early 2019 onwards.

Thomas Pringle (Donegal, Independent)
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189. To ask the Minister for Public Expenditure and Reform if he will devise and use a carbon budget methodology to ensure that Government spending and tax policies are in line with the required reductions in greenhouse gasses in order to meet the national transition objective and EU climate and energy targets for 2030. [48148/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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My Department’s role is to deliver well-managed and well-targeted public spending. When it comes to climate change that means ensuring that Ireland’s climate transition is achieved at the lowest possible cost and that it is done so in a manner which is equitable.

A Carbon Budget places a legal restriction on the amount of greenhouse gas a country or sector can produce in a given time period. The development of specific climate action policies, such as the potential introduction of carbon budget methodologies, is a matter for the Minister for Communications, Climate Action and the Environment in the first instance. However, a sustained whole of Government approach will be required to enable Ireland’s transition to a low carbon, climate resilient and environmentally sustainable economy by 2050. In this context, the National Mitigation Plan and Minister Bruton’s forthcoming multi-annual, all-of-government plan for climate action represent important steps towards mainstreaming the climate change agenda into the policy formulation and decision making processes across all of Government.

I am, together with my Department, committed to assisting in this transition. My Department is currently undertaking a number of actions in order to help mainstream the climate change agenda into policy formulation and decision making processes across all of Government. For example, my Department is currently reviewing the Public Spending Code to ensure that all Government investment decisions will incorporate an appropriate assessment of the climate consequences of those decisions. I recently accepted an invitation from the OECD to join the Paris Collaborative on Green Budgeting. Participation in the Collaborative will help us to integrate environmental and climate outcome based reporting into our annual budgetary processes. This will be an iterative process but, as a first step, this year’s Revised Estimates Volume (REV) will include a table on climate related expenditure in a separate section of that report.

Finally, taxation policy also has an important role in supporting climate change policy. In this regard, there are already several established tax measures which support the reduction in national carbon emissions, in particular the carbon tax, the CO2 based Vehicle Registration Tax, the CO2 based motor tax, tax incentives which incentivise the uptake of electric and hybrid electric vehicles, and an Accelerated Capital Allowances Scheme which incentivises the uptake of cleaner energy technologies.

It is my intention that the current suite of environmental taxes continue to play an important role in supporting climate change policy.