Transcript Slide 1
Ireland‘s Climate Policy in a European Context Richard S.J. Tol Economic and Social Research Institute Vrije, Carnegie Mellon and Hamburg Universities Global mean warming oC Year Source: IPCC 2001 I Risks to Unique and Threatened Systems II Risks from Extreme Climate Events III Distribution of Impacts IV Aggregate Impacts V Risks from Future Large-Scale Discontinuities 0.6 0.4 0.2 0.0 percent GDP 2000 2025 -0.2 -0.4 -0.6 -0.8 -1.0 -1.2 -1.4 Ireland World 2050 2075 2100 Ireland and Climate Change • Ireland’s greenhouse gas emissions are trivial, and the impact of climate change is minor • Reduce emissions because of international solidarity and responsibility • Current priorities of international climate policy should be the construction of a regulatory regime and the development of carbon-neutral energy technologies • Ireland does not have a rich history in either • Climate policy sometimes seems to be at the expense of energy and environmental policy Ireland’s 2020 Target • Ireland’s greenhouse gas emission reduction target is the strictest in the Union • The official reason is that Ireland is now the second richest Member State • Commission officials admit to resentment over Ireland’s net contribution to the EU and over Ireland’s past commitment to climate policy • Commission’s plans coincides with the ambitions of the Green Party, while the previous Taoiseach may have had plans for the presidency and the current Taoiseach has enough trouble with the EU Emission Reduction • Emission reduction in Ireland is expensive, partly because industry is already very energy-efficient 0.8 4.0 USA 0.7 3.5 3.0 New Member States Ireland 0.5 2.5 EU15 0.4 2.0 0.3 1.5 0.2 1.0 1990 1993 1996 1999 2002 2005 gCO2/$ gCO2/$ 0.6 0 25 % diff 50 75 100 Ireland France Sweden Denmark Germany Finland UK Netherlands Greece Portugal Austria Italy Belgium Spain EU14 125 2003 1990 0 500 1000 gCO2/€ 1500 2000 2500 Emission Reduction • Emission reduction is expensive, because industry is already very energy-efficient • Also because of urban sprawl and bad public transport – planning failures of previous times – carbon-neutral cars are decades away • Ireland’s agricultural sector is unusually large, and heavily skewed towards animals – current accounting rules hold the producer rather than the consumer responsible for emissions – there are no easy fixes for methane emissions • So why does the European Commission say that Ireland’s targets are fair, relative cheap and feasible? € Marginal abatement cost Total abatement cost Target R € Marginal abatement cost Cost added by new target Previous target Total abatement cost Target R € Marginal abatement cost Shifted baseline Cost reported Cost added by new target Previous target Total abatement cost Target R GHGs ETS non-ETS GHGs ETS non-ETS 2005 75.9 19.5 56.4 PRIMES 2020 Target 80.6 60.7 23.7 15.6 56.9 45.1 2005 69.8 19.1 50.7 HERMES 2020 Target 78.9 55.8 22.1 15.3 56.8 40.6 Gap 19.9 40.7% 59.3% Gap 23.1 29.6% 70.4% Million tonnes of CO2; multiply by 20 for budget implications Carbon Tax • The carbon tax (in 2020) needed to meet the 20% target equals – European Commission € 40/tCO2 – EC Impact assessment € 57/tCO2 – Cambridge Econometrics € 169/tCO2 – ESRI >€1000/tCO2 • If the domestic carbon tax tracks the EU permit price* then, according to the European Commission, Ireland will meet its EU target * €20/tCO2 in 2010 rising to €40/tCO2 in 2020 percent 1.2 1.1 1.0 Income tax Lump sum Debt reduction 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 -0.1 2010 2011 2012 2013 2014 2015 2016 2017 2018 A tax shift from labour to energy would stimulate economic growth 2019 2020 The European Commission • How can the Commission be so far off? • Partly incompetence – EuroStat gets the wrong data a bit too often – Irregularities in DG Research imply that there is one model only: monopolistic complacency • Partly structural – Climate is environment, but subjects energy, industry and transport: transfer of sovereignty – The European Commission is a legislator, the regulator, and the source of information Flexibility • The EU has proposed no less than 28 greenhouse gas emission reduction targets: one for the ETS and one for each Member State for the non-ETS emissions • (There are also targets for renewables etc) • This is inherently inefficient – the ex ante cost-effective allocation, based on a single model and a single scenario, was overridden by political considerations • What to do? Three Proposals • Irish proposal: Allow Member States to purchase ETS permits to offset excess nonETS emissions • Polish proposal: Allow Member States to sell excess non-ETS emissions to the ETS • Swedish proposal: Allow Member States to trade non-ETS emission allocation • Any two of these means full flexibility 80 70 60 50 Bulgaria Czechia Poland Slovakia Portugal Romania Estonia Lithuania Hungary Malta Greece Latvia Slovenia Cyprus Spain Belgium France Finland Germany Austria Italy Sweden Netherlands Luxembourg Ireland Denmark UK €/tCO2 90 non-ETS ETS Irish Swedish Polish Full trade 40 30 20 10 0 The cost of inflexibility Both Cost Emit Base ETS 17 18 41 91 Irish 16 3 5 0 Polish 2 16 38 91 Swedish 3 3 14 60 1.1 104 41 201 Full trade Conclusions • Climate change is a real problem and Ireland should do its bit in solving it – but it should not be a priority in environmental or energy policy • Ireland’s initial target for 2020 is too ambitious – but unlike the Kyoto target, this can now be recognised in time and solutions are being worked on