“The UK have thus decided to use the allocation as the figure used to calculate progress on their national target. Ireland will also take this approach.”

My point is that, after 2012, there will be no national allocation, so this cannot be a viable approach.

The fact is that many member states do have national targets (ETS + domestic) and in the case of the UK this is now legally binding (-34% on 1990 by 2020). This is politically important as the UK is able to say: we, as a country, have a very ambitious target, the most ambitious among developed economies.

This is important for Ireland because further to the Climate Bill, we will have a legally binding target for the whole economy also. The question then arises: what to be done about the ETS sector; how to calculate emissions? Actual emissions figures can’t be used as this would risk double counting. The UK have thus decided to use the allocation as the figure used to calculate progress on their national target. Ireland will also take this approach. It’s not a perfect solution as the territorial emissions may not have been reduced, but this is far from irrelevant, it is in fact a key issue within context of current Bill.

DECC in UK, with whom I have had discussions on this, are currently considering how they will approach this issue in post-2012, but are likely to use current approach.

I think many of these arguments - as to the inelastic nature of much consumption - are valid in all economic circumstances, but they are surely much more so in this deep depression we find ourselves in.
I heartily welcome the aid to incentivise home improvements. It should have been there a long time ago. But Bord Gais and Airtricity undercutting EBS by 10%+ showed how to change consumption patterns.

Set a low flat fare for all Dublin bus journeys, and you would acheive more than a rise in petrol prices. Make public transport convenient, integrated and efficient and you would offer a real alternative to the car.
Failing that - and providing public transport in a disastrously unplanned LA sprawl like Dublin is likely tofail - then argue for stringent targets for the car industry at the EU level.

The main thing is to take a positive approach rather than the big stick. Taxes and charges have their place, but it should not be central.

Yes, this is true for the 2008-2012 period but it would only be true in the post-2012 system if it still involved national allocations to the ETS sector, but it doesn’t. In the new scheme, each ETS installation will be participating in an EU-wide scheme, and the Irish Government will therefore have no role in determining its allocation. This makes the idea of a national target whether included in a climate change bill or not somewhat irrelevant.

Thanks - a satisfactory explanation. This is a similar problem encountered within the context of adopting a national target by way of climate change legislation - how to deal with the ETS sector? The only way out is to do as you outline above - assume the allocation is the contribution of that sector. Otherwise you double count reductions that may occur elsewhere in the EU.

Oh dear! Who’d have thought it: OPM breeds corruption!!!!! Colour me shocked fuchsia!

Further to my last comment, it is possible to work out from the Carbon Budget statement that the government is working on the basis that the Commission will assume, for compliance purposes, that the ETS sector emits the full allowable allocation which is 22.284 mtCO2eq. The overall Kyoto target is 62.84 mtCO2eq, and the non-ETS target is 40.556 mtCO2eq. Thus the assumed emissions from the ETS sector must be 22.284 mtCO2eq. This corresponds to the actual emissions in 2008 of 20.382 mtCO2eq plus the 1.9 mtCO2eq which is the gap from the total allowable allocation as reported in the quote from the Carbon Budget above.

I have now learned the importance of the distinction between ETS and non-ETS emissions in calculating the ‘distance to target’ over the 2008-2012 period. When permits were allocated to the ETS sector, they could either be used to offset emissions or, if not required, they could be sold by the recipients. Thus, when the Commission comes to calculate compliance by Ireland, it is not the actual emissions in the ETS sector which will be counted, but rather the volume of permits issued (some of the allocation was held back for New Entrants; I am still not sure what happens to that tranche and whether it will be available to the government to offset against non-ETS sector emissions or not - this is the difference between the figures for the amount allocated to existing installations and the total allowable allocation in the quote from the Carbon Budget above).

This explains why it is relevant to examine what is happening in the non-ETS sector separate from the ETS sector, and explains the pessimistic note sounded in the Carbon Budget.

Richard, I will only say this once here, because it deals as much with politics as economics, and it deals with something particular to the ‘Irish’ culture and system in a not very good way. I am not sure whether you will immediately understand it or not. I haven’t yet gone through the comments above, but I hope to study the discussion above in the near future. But I want to say this out straight. It may help to frame debate and cut to the chase a bit.

In Ireland we have always had a problem. We are not sure really, if a certain proportion of society ‘live off the system’ to an over extent. You don’t hear that much about it today somehow, but when I was growing up in poorer times in Ireland, it was a hot topic. Did some people deserve hand outs from the state etc, etc.

Anyhow, that was a different sort of Ireland in the late 1980s when I grew up. There was nothing on the horizon which remotely resembled global warming. Although, I for one did take a general concern in matters to do with the environment. I had never heard of anything called a ‘green party’ at that time.

I grew up on Frank McDonald essays that were published at the end of each week in the Irish Times newspaper. Though the Irish Times was in quite limited circulation in my particular remote corner of west Limerick, there was a large-ish village not too far away and we could buy the IT in the supermarket there. McDonald introduced me to a world that people didn’t talk about much where I came from. I think nearly 9 boys out of my class of 10 boys at National school were sons of small farmers. I was the odd man out as my old man was a civil servant. So perhaps it was fitting that I should become the out-of-sync, middle class environmentalist in my class.

Anyhow, I just insert that last paragraph as an aside. Bear in mind, that many young teenagers like myself are reading McDonald’s articles in the Irish Times these days and google-ing his articles on their computers, for their school essays. Without McDonald’s journalism, I don’t know what my young teenage years would have been like. The fact only occured to me the other day, that I had bought the Irish Times as a kid for the purpose outlined above. Funny the things your mind brushes aside. The fact is, I am older now and I think Frank is a bit full of it. But credit where it is due, he did set me on the right track.

But back to welfare recipients and saving the environment. The simple fact of the matter is, for years and years in my childhood the debate simply focussed on the ‘down-trodden’ in society. How we could help them out and so forth. Whether they deserved it or not. But imagine this scene for a moment.

It is the doctor’s waiting room and there are two patients sitting together. One is a member of society like I was describing, who expects assistance from government, but they were dealt the wrong cards in life. Thats fair enough. But sitting next to that patient is the ‘world’.

Guess what? The world has a hole in it’s atmosphere, try and compete with that!

My point being, during my childhood there was a segment of Irish society that had little going for them - except maybe, they were the bottom of the bucket and received pretty much the lion’s share of attention and sympathy from the ’system’. Nowadays, things have changed and there is an even sick-er patient of gigantic size who is the focus of most of the concern - the world.

My point being, as long as the lower tier of society were the sick-est patient they command the attention. Now they have to compete, and perhaps even get off their bums and work to pay ‘carbon’ taxes to try and pay for medication for this over-sized football. That is a sea change for some people in society today. Some of the opposition I hear in daily conversation against carbon taxes comes from a direction of folk who knew how to work the system for many a long day.

However, that is not to say you cannot be broke, un-employed and without prospects, but still be in support of a cleaner environment. On the contrary.

Thanks, you are right that it is net emissions, i.e. after forest sinks are deducted, which are relevant for the Kyoto first commitment period. This is actually made clear in Annex 1 of the National Climate Change Strategy but I was confused by the reference to LULUCF in the 2008 EU effort-sharing directive.

I was unaware that any serious science indicated the possibility of a “runaway greenhouse effect” until now. Remarkably, this new result emerged during the High Level Segment (Heads of State and Ministers) of the conference, rather than an expert segment.

It seems to me that a Carbon Tax of €15/tCO2 is now far too low, whatever the EU ETS market says. Minimum €1,500/tCO2 to offset the imminent threat of extinction.

Of the 130 million for retrofitting houses, 76 million will be used for social housing under two schemes (40 million DoE and 36 million DCENR). In addition fuel benefits will be increased to off-set the fuel poverty implications of the carbon tax introduction. This is a massive increase in funding and entirely appropriate as this sector does not have the private capital to take advantage of grant aided scheme.

@ Richard

Only half of increase fro -20 to -30% could be met outside the EU as far as I remember. Rest must come from domestic efforts.

@ Alan

I am as confused by you as division into ETS/non-ETS in pre 2013 period. The net figure is the one for Kyoto period BTW- ie: sinks are permitted.

30% target will only be triggered if ‘comparable” commitments are made by other developing countries. -17% on 2005 (Waxman-Markey) probably does not fit the bill.

The Irish government has a strong supply policy as well. Ireland will shatter world records on wind penetration and dreams of wave power.

The German record on solar power is not unblemished, by the way. The cost is high (but hidden) and the efficacy is doubtful as the main impact seems to have been a shift in solar from Southern Europe (where there’s sun) to Germany (where there’s little).

If the carbon tax is designed to induce people to reduce their use of fossil fuels, rather than to raise funds, it makes sense that it hurts the less well-off more, as they have the most to gain from reducing their consumption.

Ideally, the carbon tax would be allied with strong tax incentives to fit poor people’s houses out with energy-saving insulation etc.

The government grants are only available to those with the initial capital to take advantage, who will generally have more energy efficient homes in any case - if only for their own comfort. Similarly they will drive more efficient (modern) cars. The more hard pressed will have neither the option of upgrading their car nor of changing their commuting behaviour.

Why can we not look at supply? The Germans have a high percentage of solar powered energy because they have subsidised its cost. This has led to large private investment and high take up by the consumer. And people don’t feel browbeaten by zealots. Why are green economics so wedded to right wing ideology?

http://timworstall.com/2008/05/30/elsewhere-3/

Do Ireland’s AA not argue that motoring taxes are far too high.

I appreciate it is not quite related to the original post but it rarely seems to get discussed and I thought Richard, this might be somewhere that you could advise.

I have been on to Amazon and all textbooks with that in their title are on meteorology. I studied meteorology at college.

Tony Allwright made specific claims, all I am asking you is to prove they are wrong. You are the one who said he is wrong. Surely that is not so difficut.

After all the taxpayers of the Western World are being asked to invest Trillions of Euros, so the underlying science must surely be proven beyond all reasonable doubt.

Total liquid fuel use in transport fell by 1.9% according to the SEI. That is surprisingly little.

Easy to say. A full refutation please.

Note that the NTMA is only allowed to buy permits. If it buys too many, it cannot sell the surplus. (Or indeed, if the highly capable and well-paid trader spots an opportunity for arbitrage, he will have to ignore it.)

The difference between the 20% and 30% target will be met by emission reduction outside the EU.

If the government must pick a winner, then it should do so on the best available knowledge.

Gross emissions are now forecast at 63.93 mtCO2eq for the five year period. The budget shows forest sink reductions of 2.24 mtCO2eq, leaving net emissions at 61.63 mtCO2eq, apparently comfortably below the KP target.

However, although the KP does allow for the inclusion of activities related to land-use, land-change and forestry (LULUCF) in emission inventories, I understood this was not accepted by the EU when setting its own binding national ceilings. It was agreed by the EU Parliament and Council in December 2008 that, in the event that an international agreement on global reductions is not reached, Member States may include emissions and removals from LULUCF towards meeting the 20% reduction target (relative to 1990). The aim is that this proposal would enter into force from 2013 onwards, so it would seem to be the gross emissions figure which is relevant for Kyoto Protocol purposes. However, the government appears to using the net emissions figure to compare with the KP target, and I would appreciate some explanation of this.

Incidentally, a strict reading of this condition would seem to suggest that, if there is an agreement in Copenhagen this week, this would not only increase the severity of the 2020 emissions target we would have to meet (as it would trigger the EU’s commitment to a 30% reduction over 1990 levels rather than the current 20% target) but also it would exclude the use of forest sinks in meeting this more ambitious target. The EPA, in its Greenhouse Gas Projections for 2008-2020 published earlier this year, noted that “The inclusion of carbon sinks in emissions accounting post-Kyoto are critically important for Ireland and will play a significant role in bringing Ireland closer to its 2020 target for non-ETS sector emissions.”

However, back to the KP targets for 2008-12. The ‘distance from target’ shown in the 2010 Carbon Budget amounts to 1.1 mtCO2eq per annum. This represents the extent to which the government will need to make use of the flexibility mechanisms in the KP to purchase emission reductions elsewhere. The amount is much less than the figures set out in the National Climate Change Strategy and even less than in the EPA projections in March of this year, which should be good news. However, the Carbon Budget itself strikes a more pessimistic note:

“It is clear that even with substantial downwards revisions of historical data, a substantial challenge is still evident in the non-ETS sector. To avoid purchases of emissions permits to achieve compliance, emissions need to fall to an average of 40.556 Mt over the five years, 2008-2012. In the first of these five years emissions in these sectors totalled 44.956 Mt, a full 4.4 Mt above the target. In the ETS sector emissions totalled 20.382 Mt, only 0.41 Mt above the amount allocated to existing installations, and approximately 1.9 Mt below the total allowable allocation.”

I am puzzled by this statement because, although there is a division between the ETS and the non-ETS sectors in terms of regulation, I am not aware that there are separate targets for the two sectors for this first KP period. The statement is right to highlight the challenge of non-ETS reductions for the post-2012 period, when we will have annual targets to meet on the path to 2020, but I can’t see why the split is relevant to the 2008-2012 period, and would be grateful for some explanation.

If the aggregate 1.1 mtCO2eq figure is the appropriate one, then it is interesting to read the NTMA’s Carbon Fund report for 2008 which details in activities in managing the Carbon Fund. It expects investments made to date in three carbon funds to yield 3 million Kyoto Units in 2008-2012, and in addition it has purchased 6.15 million CERs, or a total of over 9 million units. It would thus seem we have more than enough units in hand to cover the expected overshoot of our Kyoto target for 2008-12, and indeed may be in a position to sell back some of these units towards the end of the period. Is this the case?

I know your arguments against double regulation, but I wonder can it be justified in the case of the residential sector? The residential sector is a source of CO2 emissions because it burns fossil fuel energy for space and water heating and for cooking. The only options to address this are higher building standards for new housing and (because we won’t have too many of those in the next few years) retrofitting of the existing housing stock.

The recent McKinsey Report for the SEI considered two ‘levels’ of retrofitting - Level 1 consists of attic and wall insulation and double glazing, while Level 2 involves bringing buildings to ‘passive house’ standards, which implies a very low but not zero thermal energy demand (40kWh per square metre of floor area, compared to 96 KWh in the 2008 building standards). Level 1 has a negative marginal social cost, that is, investment in retrofitting can pay for itself assuming a social cost of capital of 4% per annum. McKinsey recognise that the CBA would be less favourable from the decisionmaker’s (householders’) point of view but although the figure may be in the report I could not find it (its a lengthy document!).

Given the failure of households to invest in energy-saving measures in their homes (either because their cost of capital exceeds the social cost, because their time horizon is too short, because the benefits accrue to agents other than those undertaking the investment, or because of lack of information), is there not a separate case for the government’s retrofitting subsidy to push householders’ behaviour in the optimal direction?

Of course, the pushing could also be done by way of a stick rather than a carrot. Here the proposed property tax could offer an opportunity. At the moment, it seems the tax will be levied on a site value basis, once the valuation process is completed. Analogous to the emissions-linked motor vehicle tax, would it make sense to link the property tax to a building’s energy efficiency, with the rate doubled (or whatever) for the least energy efficient houses and halved for the most energy efficient? I accept that, at least temporarily, this would increase the implicit carbon tax the least energy-efficient households would pay above the socially optimal level, but it may have a greater signalling effect than the extra imposition on the price of heating oil or natural gas.

Factual scepticism. Note the amount paid to get pro AGW results!

Carbon tax is a good idea edxcept that it is designed to become a means of making money via trading.