Policy Options to Reduce Ireland's Greenhouse Gas Emissions

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An ESRI report by Sue Scott and Thomas Legge

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This report, by Sue Scott and Thomas Legge, assesses the pros and cons of the different instruments available to the government to put the country on a low-carbon trajectory of economic recovery.

Ireland faces a difficult and long-term challenge to reduce its greenhouse gas emissions, but the current economic crisis offers an opportunity to lock in reforms that could reduce costs in the long term. The authors recommend:

1. Legislative approaches: The Government directly controls a large part of the economy, e.g. through regulation, the public service, and its vast ownership of buildings and vehicles. A genuinely independent Climate Change Commission could ensure consistency across policies and encourage public participation.

2. Market- and incentive-based approaches: Emissions trading and carbon taxes are good at securing emission reductions at least cost. Carbon taxes should be used to cover the approximately 70 percent of Irish emissions that are not covered by the EU Emissions Trading Scheme. Revenues should be used to offset income or labour taxes to aid competitiveness, with a share set aside to help the vulnerable. Experience with this approach elsewhere has been favourable and widespread adoption would be ideal.

3. Standards and regulations: These can be crude and costly, but standards and regulations help in instances of market failure, e.g. buildings insulation and spatial planning.

4. Subsidies: These require higher taxes to fund them and in the absence of carbon pricing they can be ineffective or even counterproductive. They are appropriate for research and development of technologies, though carbon pricing is needed to encourage adoption.

If the Government does not apply policies that ensure that a long-term credible price applies to all carbon emissions, accompanied by measures that support society, competitiveness and innovation, the nation will pay more to achieve its goal. But how to implement such a policy mix is still an open question. A major step would be recognition that the framework requires protection from short-term political interference, clearly defined incentives through a price on all carbon, and a transparent, dynamic and fair process with which the public can engage.

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