While action to tackle climate change is under way in many countries, one big obstacle is the cost.
A study by French economist Jean Pisani-Ferry has estimated it would cost between 2 and 3 per cent of national income to decarbonise developed countries. However, when spread over 10 or 15 years it would lower potential growth rates by relatively little.
My original estimates back in 2021, when the Climate Change Advisory Council published the first draft set of carbon budgets, were for similar costs for Ireland.
However more recent work by Niall McInerney of the Central Bank and myself, published by the Climate Council along with its most recent carbon budgets to 2040, suggests Ireland’s cost of decarbonising will be lower than those earlier estimates.
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The reason we calculate it will cost less for Ireland to reach net-zero emissions by 2050 is due to four factors:
First, Ireland has already significantly increased climate investment, so there is less of a hill to climb in the future. Although more needs to be done, we have invested a lot to grow renewable energy capacity. We are retrofitting buildings much faster than before. While sales of electric vehicles need to be much higher, they are above the level of 2019-20. And there’s been a lot of investment in public transport.
Weaning ourselves off fossil fuels has become relatively cheaper because of the huge increase in the price of such energy, especially of gas, following Russia’s war in Ukraine. We spent up to 4 per cent of national income on fossil fuels in 2023, up from 2.5 per cent in 2019. If we manage to become fossil fuel free by 2040, we will save that 4 per cent of national income. Over the next decade there will be big investment costs to switch to renewables, but in the long run this will give us cheap energy when the wind blows or the sun shines.
The Central Bank’s economic modelling now suggests that although the Irish economy is at full employment the additional funds needed to eliminate greenhouse gas emissions will not fully crowd out other investment. That reasoning has also allowed us lower the estimated costs of adjustment.
Fourthly, Teagasc now estimates that it will not be as expensive as originally thought to make the changes needed in agriculture to lower the emissions from that sector.
Four years ago, it was forecast that agricultural output would need to fall substantially to meet national emissions targets. Today’s analysis from Teagasc suggests that while herd numbers will need to fall, if that were concentrated in the beef sector (where farmers make little money) it would allow some limited further increase in milk output, which is valuable to farmers.
There has been significant progress over the last three years ... and it did not significantly disrupt our way of life
This scenario would mean that overall output in food processing would not be adversely affected, although there would be a switch in composition with fewer meat products and more dairy.
While it is now clear we will not meet the target of halving our emissions by 2030, nevertheless there has been significant progress made over the last three years. It is also notable that achieving that progress did not significantly disrupt our way of life.
But even if achieving lower emissions will cost us less than previously thought, it will not be plain sailing. There’s a lot more work to do and there will be costs involved. But, ultimately, achieving net zero will bring a dividend in lower energy costs.
Some easy wins have helped our headline achievements, such as importing electricity from Britain when the wind did not blow here. This saved money and reduced our registered emissions in 2023 (while some of the imported electricity was generated sustainably, some probably came with “red, white and blue” emissions).
The public EV-charging network is also well behind where it needs to be
The incoming government will need to do more to encourage the switch to electric cars where we are well off target and sales have slumped. A high volume of new electric car sales is also needed to sustain a good second-hand market and accelerate mass ownership of electric vehicles.
As today’s cars have a long useful life – 15 to 20 years – high sales of fossil-fuel-powered cars today will cast a long shadow of raised emissions well into the future. The public charging network is also well behind where it needs to be.
Redoubling efforts to decarbonise our economy under the incoming government will come at a limited cost. However, It remains to be seen whether the necessary measures, including cheap changes in the planning and regulatory system, are actually implemented.
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