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OECD Environmental Performance Review of Ireland 2021

This is the third OECD Environmental Performance Review of Ireland. It evaluates progress towards green growth and sustainable development.  The report found that Ireland’s 2020 targets are out of reach, with any positive Covid-9 effects in terms of reduced emission temporary. It also found that environmental pressures are likely to intensify due to population growth, increasing urban scrawl, road traffic and livestock and our public spending on climate related research and development among lowest in OECD.

In terms of agriculture the report found that farm payments should shift towards payments based on measurable environmental improvements.  Removing favourable tax exemptions (tax breaks) for some agricultural inputs would lead to a more efficient use of resources, improved water quality and reducing emissions.  To maintain a consistent price signal Ireland should gradually remove remaining tax incentives and rebates that encourage wasteful fuel use in agriculture, fishery, heating and transport.

The OECD also found that road transport is a major and increasing source of GHG emissions. Focusing transport taxation on road use will better will better address environmental and congestions costs, as well as help offset declining revenue from fuel taxes. There is potential to integrate road freight, rail and shipping and rebalance economic incentives in favour of rail freight.

Among the main recommendations from the report are:

  • Ensure the roadmap for a low carbon transition of farming and the agri-food sector strengthens coherence between production targets and climate goals as well as objectives related to air emissions, water quality and biodiversity.
  • Ensure grants for energy efficiency in the residential sector target deep renovations giving priority to publicly owned housing stock, to most vulnerable households and most carbon intensive residential buildings.
  • Implement Waste Action Plan for a Circular Economy fully and introduce a levy on the incineration and exports of reusable and recyclable waste.
  • Accelerate investment in extending and upgrading water supply and sanitation infrastructure and assess what funding model most appropriate.
  • Shift farmer income support towards agri-environment payments based on agricultural outcomes including reduction of nutrient losses (a major contributor to water and river pollution).
  • Make Green Public Procurement mandatory for public authorities.
  • Customise just transition measures to local needs by (i) offering targeted skill and entrepreneurship training programmes to affected workers; (ii)providing targeted social benefit schemes to vulnerable household; (iii), ensuring widespread access to adequate infrastructure and services; (iv)promoting green business opportunities and supporting SMEs
  • Increase diesel tax rate gradually so that it at least reaches the petrol tax rate in medium term
  • Establish a process to systematically screen actual or proposed subsidies and tax provision to identify those that are not justified on economic, social and environmental grounds and develop a plan to phase out fossil fuel and other environmentally harmful subsidies
  • Rebrand fuel allowance and provide it to eligible households during the whole year with a view to fully delinking it from heating fuels.
  • Consider introducing policy instruments such as congestion charges to better manage travel demand in urban areas and curb increasing congestion.
  • Fully implement the measures in the Climate Action Plan in all sectors in a timely fashion.

Social Justice Ireland welcomes the publication of the report, we urge Government to begin implementing the recommendations immediately.  

Government must treat this report as an impetus to implement a complete shift in policy away from business as usual and towards transition and adaptation.  This requires immediate action and immediate investment.  Although initially costly, the returns and dividend we will reap from the investment is significant.  It will put Ireland on the pathway to meet 2030 and 2050 targets.  Without action now, the challenge becomes almost insurmountable. 

A continued focus on cost-neutral or cost-effective actions to mitigate the impacts of climate change in the Climate Action Plan is misguided.  While addressing the impact of climate change and implementing adaptation policies comes at a cost and requires strong collective effort, the cost of inaction and the associated social fallout would be much higher[1].

Agriculture
We must move away from the existing approach whereby the targets in our agricultural and food strategies serve to undermine the targets in our environmental policies.  Improvements in production efficiency will not be enough to meet our targets and the long-term trajectory for the livestock sector must be considered.  We welcome the recommendation in the OECD report that farmer income support moves agri-environment payments based on improved environmental and agricultural outcomes including reduction of nutrient losses which is a major contributor to water pollution.  Continued support for the beef sector must be contingent on much stronger conditionality and essential income support for low-income farm households via CAP (Common Agricultural Policy) should be consistent with the green transition and emissions reduction ambitions.

Support for sustainable agricultural practice is important to ensure the long-term viability of the sector and consideration must also be given to how the projected increase in agricultural emissions can be offset. With regard to our national and international climate commitments it must be asked what agricultural policy will be best-placed to ensure Ireland meets its national and international targets: Is it a policy of agricultural expansion and increased emissions to reach additional markets or is it a policy of ensuring Ireland produces the food required to meet our population needs and supports the agricultural sector in the developing world to ensure they can provide the food required to meet their own population needs?

Transport

Transport continues to dominate Ireland’s energy use, and transport energy use has increased by 25 per cent since 2012.  Heavy goods vehicles showed the strongest growth in energy use in transport in 2019, and electric vehicles made up just 0.3 per cent of the total private car stock.  Road transport is not the only emitter of GHG.  Emissions from aviation are not taxed directly, jet kerosene is currently not subject to Mineral Oil Tax, yet air travel is a significant polluter.  Ireland needs to support EU efforts to control emissions in aviation to prevent a return to the trend of increasing emissions.  Jet kerosene use increased by 1.2% in 2019 and is now greater than petrol use and air travel is now second only to private cars as a share of transport energy.  The time has come to look at the aviation sector and the policy levers that are available to ensure that it makes a contribution to our climate targets.  No sector can have a free pass, and with all other sectors being required to make a contribution to our climate targets the aviation sector should be no different.  As part of a comprehensive carbon policy to meet our national targets for 2030 out to 2050, Social Justice Ireland proposes the introduction of a Commercial Air Transport Tax. This is in line with the ‘Polluter Pays’ Principle and the Environment Liability Directive. 

Tax Expenditures

Social Justice Ireland welcomes the OECD recommendation to systematically screen actual or proposed subsidies and tax provision to identify those that are not justified on economic, social and environmental grounds and develop a plan to phase out fossil fuel and other environmentally harmful subsidies.    According to the latest data published by the CSO, €2.4 billion was not collected by the Exchequer due to direct subsidies and revenue foregone due to preferential tax treatment supported fossil fuel activities in Ireland in 2018[2].

In terms of overall public expenditure, systematic reviews should be carried out and published on the sustainability impacts and implications of all public subsidies and other relevant public expenditure and tax differentials. Subsidies which encourage activity that is damaging to natural, environmental and social resources should be abolished. 

In terms of environmental subsidies, they must be reviewed immediately.  The existence of these subsidies means that government has a wider fiscal space available to it in terms of climate policy and taxation.  Government can address climate challenges by removing those subsidies which are harmful rather than levying new environmental taxes or increasing the existing environmental tax rates/levels.  This gives additional budgetary space for Government when implementing and designing climate policy.  By eliminating these harmful subsidies and investing in renewable energy and schemes to address energy poverty Ireland will be in a much better place to meet our energy targets. This is a policy that Government can begin to implement immediately and would be an important component of a national mitigation and transition programme. If Government is really serious about Ireland transitioning to a low carbon economy all subsidies for fossil fuels should be reviewed in 2021, with those which are harmful removed and the savings invested in renewable energy. 

A Green Recovery

A low-carbon pandemic recovery could cut 25 per cent off the greenhouse emissions expected in 2030[3].  In fact a green fiscal stimulus would support global GDP and employment during the recovery from the COVID-19 crisis and lay the ground for higher carbon prices by boosting productivity in low-carbon sectors [4].    The Climate Change Advisory Council and the EPA have stressed the absolute urgency of a green recovery if Ireland is to meet our climate ambitions and targets. 

The post-pandemic recovery packages being development will reshape the economy for the longer-term, representing life and death decisions about future generations, including through their impact on the climate.  Governments should steer investment towards a productive and balanced portfolio of sustainable physical capital, human capital, social capital, intangible capital, and natural capital assets consistent with global goals on climate change[5] and recovery package must also address existing concerns such as poverty, inequality and social inclusion.  Recovery packages could exacerbate intergenerational inequities if they are focused on consumption, rather than productive investment delivering sustainable returns for future generations. 

In terms of expansionary policies, government spending on investment is   be preferable to tax reductions, delivering higher multipliers[6]

Five policy areas in particular have been identified in international research with high potential on both economic multiplier and climate impact metrics for Government recovery plans.

1)            Clean Physical Infrastructure

2)            Building Efficiency Retrofits

3)            Investment in Education and Training

4)            Natural Capital Investment

5)            Clean Research and Development

Renewable energy and clean energy infrastructure are employment intensive and they offer high returns on public investment as they drive down the cost of transition to clean energy.  Residential and commercial retrofitting, natural capital spending in areas such as rural ecosystems, biodiversity and expanding parkland are identified as fast-acting climate friendly policies that will have an immediate impact and long-term returns.  Natural capital spending is identified as particularly appropriate in current circumstances because worker training requirements are low, many projects have minimal planning and procurement requirements, and most facets of the work meet social distancing norms.

The investment plans associated with Covid-19 recovery will be critical in setting the environmental pathway for the next few decades, and crucial for Ireland’s climate ambitions and targets.