The Irish Economy

Minister Hogan appears to have waived the septic tank registration fee. That is fair and proper. The sewage bill in cities and towns is picked up by the taxpayer too. Either everyone poos for free, or no one. I favour the latter.

The minister has also indicated that inspections of septic tanks will be “risk-based”, and has redefined that concept as “if pollution is found nearby”. Commonly, risk is an ex ante concept. Inspections are supposed to prevent pollution.

Article 13 of the waste directive (2006/12/EC) specifies that inspections be periodic. Unless the department intends to periodically find pollution near each and every septic tank, the proposed inspection regimes will breach EU law.

That would not be a first. Friends of the Earth reviews the history of Irish waste water and EU law. Ireland has been in breach of EU waste law since the original waste directive (75/442/EEC) of 1975. No wonder that the Commission is seeking to impose fines.

UPDATE: The minister is in a particularly generous mood this week: There will be grant aid to upgrade faulty septic tanks.

The public consultation on the establishment of Irish Water opened today. See here and here.

As I’ve argued before, charging for water and waste water is right and proper; and doing so through a state-owned, tightly regulated monopoly is a reasonable solution (although you can argue for a mutual company instead).

The contents of the position paper published today were well-leaked and contain little news. The position papers confirms that Irish Water will also be responsible for waste water and waste water treatment. Council staff will be transferred to Irish Water, probably with a considerable improvement in working conditions.

The Commission of Energy Regulation will regulate Irish Water. There is no sign of the creation of a super-regulator. The new CEWR will be inter-departmental, though, an interesting experiment.

The department persists in two follies - mandatory roll-out of water meters, and free allowances - but a third folly - universal metering - has been dropped.

The time table has been slipping, which is no surprise as it was so ambitious. The public consultation was supposed to start in October, and Irish Water was supposed to start work in January. Originally, the plan was to install 1.4 mln meters in 2 years time; that is now 1.0 mln meters in 3 years time - less than half as fast. It is not clear to me that this would support 2,000 jobs: 500 meters per job, installing two meters in three days.

To make up for lost time, the Department of the Environment now intends to start the work of Irish Water. This is a mistake. Like any department, Environment is struggling with staffing as it is. Utilities are better at being utilities than departments are. Utilities are also better at resisting cronyism than departments - every TD will want a water metering contract to go to their favourite engineer cq plumber. Irish Water will wrestle with the legacies of the county councils, and it is now being saddled with a departmental legacy as well.

Maybe the public consultation will further improve the plans.

The Environment Editor of the Irish Times, Frank McDonald, has written in Nature.

It is interesting to compare some of the notions of journalistic neutrality (Wikipedia and Irish Times; Nature’s mission statement is surprisingly silent on impartiality) to McDonald’s choice of words, such as “dark forces”.

McDonald uses language that is more usually associated with activists to describe the alleged threats of climate change, and attributes events in sub-Saharan Africa to climatic change in a way that is unsupported by any science.

Werner Kraus has a different take.

The UNFCCC Job Creation Program once more demonstrated its awesome force. Some 20,000 people met in Durban for 2 weeks. If you add travel, preparation and debriefing, that is easily 1,000 person-years.

What did we get for this? The final documents have yet to be published, but here is what seems to be reasonably accurate summary. There were three agreements.

First, further details were added to the mechanisms through which rich countries would transfer money to poor (and not-so-poor) countries for (a) reducing emissions and (b) helping them cope with climate change. The latter is an imperfect form of liability and compensation (we emit most, they suffer most). The former is an imperfect form of arbitrage (emission reduction is dear here, cheap there). This is progress of sorts, but the money to be transferred has yet to materialize (and no one seems to have much to spare at the moment).

Second, the Kyoto targets were extended to 2015. This creates the diplomatic illusion of having saved the Kyoto Protocol, but all countries that are bound by Kyoto had already adopted unilateral targets that are more stringent. Well, the EU has, and Canada, Japan, and Russia have already indicated that they will not take seriously this part of Durban agreement.

Third, the Durban Platform was established. The Platform pledges an agreement by 2015. It replaces the Bali Roadmap, which pledged an agreement by 2009. Once more, the countries of the world agreed to agree at a later stage.

Nothing much to show for those 1,000 person-years of work. And this was the 17th Conference of the Parties. One wonders whether there really are no better investments of the time and effort.

The Examiner has a story on the proposed LNG terminal at Tarbert in the Shannon estuary. This is a privately funded project and a welcome stimulus for North Kerry. As long as the developers play within the rules, public policy analysts should have no opinion on such matters. But as the gas market is so heavily regulated, private actors affect the public good. The LNG terminal would, for instance, improve the security of supply, which is very valuable.

Minister Rabbitte argues that Shannon LNG would increase the price of gas. This is absurd at first sight. Increased competition should reduce the price. The minister is right, though. To see why, we need to consider the gas interconnector from Scotland that lands in Gormanston in Co Meath, or rather the way in which its price is regulated: The annual cost of the pipe is distributed over the gas it carries.

The interconnector is a competitor’s wet dream. If you capture a small part of the gas market, the interconnector will increase its price — because its annual cost is distributed over a smaller volume. You can then increase your price to just below that of the interconnector and gain yet more market share. And the interconnector will raise its price again.

The solution surely is to change the regulation of the interconnector rather than to block the LNG terminal. The current regulation, which may date back to the days of Minister Woods or Fahey, is a neat example of something that makes sense in the short run only.

Note the separation of powers. Minister Rabbitte is the executive branch of government and an influential part of the legislative, he appoints and controls the budget of the regulator, and he is the trustee for the shareholders (us) of the dominant company in the market.

With all eyes on the euro, the budget, the Middle East, some remarkable, smaller stories emerged.

Irish roads are now among the safest in the OECD. I guess the main reason is that much traffic has shifted to the new roads.

The 2010 Drinking Water Quality Report is out. Water quality is getting better, but slowly. Biological contamination is down and trihalomethanes (which result from improper chemical treatment) are down too.

Construct Ireland reports on an unpublished SEAI study (the leak is easily identified) that shows that building standards were not enforced. This is not surprising in itself, but the scale is. Sean O’Rourke’s interview with Gerry Wardell is worth a listen, and SEAI’s response is intriguing.

The EU is putting pressure on Ireland to hurry up with water charges. Ireland is obliged to fully recover the costs of water services. This implies an average charge of 500 euro per household per year, 5 times what is expected to be announced in next week’s budget.

The carbon tax is likely to go up. Initially, the carbon tax was tied to the ETS permit price, which has gone down. The market is least distorted when permit price and carbon tax are equal. Coal and peat, the fuels that emit most carbon dioxide, are still exempt from the carbon tax and there is no sign of the commencement order.

Dublin is considering a fire call-out charge. This would be wrong. Fire is an emergency. One should never hesitate to call for help.

Minister Rabbitte for Energy sketches several reforms of household energy policy in today’s Irish Times. These are plans for the longer term.

There are a range of fuel allowances. Some are means-tested, some are not. None are needs-tested. Houses may be insulated at the exchequer’s expense, but the occupiers are still entitled to fuel allowances. Minister Rabbitte suggests that, in the future, fuel allowances will be directed towards colder homes. That is a welcome improvement.

There are grants for home energy efficiency improvement and micro-renewables. These grants are optimized for administrative convenience rather than emission or fuel poverty reduction. These grants also imperfectly address the core issue: The lack of access to capital to invest in home improvement. Minister Rabbitte suggests that, in the future, grants will be replaced with cheap loans. That is a welcome improvement.

Lack of information is another issue with household energy use. Minister Rabbitte suggest that, in the future, Building Energy Ratings will be mandatory. They are already, but this is not enforced and many prospective buyers/renters seem to be unaware of their legal right to a BER. Reinforcement of this regulation is a welcome improvement.

I had a close look at BERs in England. An English BER is about half the price of an Irish BER, and it contains much more information on heating costs and potential improvements.

Minister Rabbitte also suggests that houses with a poor BER will be taken off the market. I’m not sure that that is wise. It is rather tough on the current owners of such houses. It will also drive up rent particularly in the lower price segments.

UPDATE: 30.9% of houses have a BER of E, F or G.

Three good ideas, so, and one bad one. There is plenty of time to reconsider and refine.

Today, the 17th Conference of the Parties (COP17) of the United Nations Framework Convention on Climate Change (UNFCCC) starts in Durban, South Africa. Unlike the summit of 2009 in Copenhagen, expectations are low. The political attention is firmly fixed on the economy. The negotiators will thus make the same demands that were rejected by their counterparts at previous conferences.

Climategate 2.0 broke last week, too late to influence official positions. Besides, the new batch of emails show more of the same. The main new element is the role of the BBC.

Some 20,000 people are expected to travel to Durban. These events are expensive, definitely when compared to the expected result. Some Irish civil servants are rumored to travel in style. This is not at the expense of the Irish taxpayer. Travel to climate negotiations is covered by the development aid budget. As the aid budget is fixed, Irish travel to Durban comes at the expense of people in Ethiopia, Lesotho, Malawi, Mozambique, Tanzania, Timor-Leste, Uganda, Vietnam, and Zambia.

The low expectations for Durban are a blessing in disguise. I have argued that the current international climate regime is complete. The UNFCCC has standardized monitoring of emissions. The Kyoto Protocol / Marrakesh Accords has created international trading mechanisms for emission reduction credits. (Kyoto’s targets end in 2012 but the Protocol itself has no sunset clause.) The COPs have increasingly morphed into fora for pledge and review of domestic policies and targets. That is all that is needed, and all that is feasible (bar a transfer of sovereignty to the UN).

The negotiators in Durban should therefore focus on refining the existing mechanisms. That is quite boring stuff, so that hopefully the majority of the 20,000 in Durban will decide not to return to COP18 in Qatar or South Korea. UPDATE: It will be Qatar.

UPDATE: After pretending to be greener than Labour for a while, the Tories now argue that jobs are important too. This would put London on a collision course with Brussels. The UK will want to rid itself of the Large Combustion Plant Directive too.

UPDATE: Less than 72 hours after I predicted nothing much would happen in Durban, the EU changed its tune. Poland is not particularly keen on EU climate policy. They have the presidency. Talking tough, they at once please the greens and reduce the chance of success.

Eight academic economists have left Dublin in recent months or will leave shortly. That may seem like a small number, but there are only 200 or so academic economists in the country. They all have moved / will move to warmer places: Stirling (2.0K warmer on average than Dublin), Brighton (2.2K), Oxford (2.2K), Canberra (3.4K), Melbourne (5.3K) and Lisbon (7.0K). Dublin economists thus disregard the opinion of the European Union that a climate change of 2.0K is dangerous.

Between 1998 and 2009, intra-union migration has been towards warmer places. The average migrant in the EU experienced a warming of 0.6K. The average masks a wide spread. About 10% of migrants stayed in roughly the same climate, 17% experienced a cooling of 2K or less, and 16% a cooling of more than 2K. 24% experienced a warming of less than 2K, and 33% a warming of more than 2K. 450,000 people opted to live in a climate that is more that 5K warmer than what they were used to.

Obviously, one cannot compare the individual impact of moving to a warmer climate with the impact of global warming, but at the same time it is clear that both Dublin economists specifically and intra-European migrants generally do not object to a warmer environment.

City climate data from World Guides. Country climate data from the Climate Research Unit. Migration data from EuroStat, for Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Austria, Poland, Romania, Slovenia, Slovakia, Finland, Sweden, United Kingdom.

Sean and I have an article on green growth at Vox. It builds on a paper recently published in the Energy Journal. Research funded by the EPA.

I recently wrote that Dublin does not use MapAlerter, a nifty internet service that allows county councils to alert people in particular areas by SMS, Email, Twitter, RSS. I was wrong. Dublin does use MapAlerter. It even issued a flood warning on Tuesday, October 25, 2011.

The Irish Times ran a series on water services in Ireland.

The first article is perhaps the most interesting. It leaks the yet-to-be-published report on the water sector by PWC. PWC will apparently be fairly critical of the current system, which nicely fits with the plans by the Minister for a radical overhaul. There will be more investment in water infrastructure. There will be a water regulator. Word on the street has that the Commission for Energy Regulation will have its mandate extended to water (but not to transport). There will be national water utility. Bord Gais, Bord na Mona and the National Roads Authority are bidding to run Irish Water. Only Bord Gais has experience in mass retail.

The piece discusses the transfer of Shannon water to Dublin, but the Minister disappears from the story at that point. I would think that we first want to promote water conservation and fix the leaks.

The piece is silent on the future role of the county councils in water. If Irish Water runs the show, what will happen to the water infrastructure owned by the county councils? What will happen to the civil servants who run this?

Another article wonders what will happen to the private water schemes. Will they be nationalized? Will households with a private well and a septic tank have to pay the water charges? That would be grossly unfair.

The inspection fees for septic tanks are unfair too. Us city folk poo for free — or rather, waste water services are covered from general tax revenues. That is, septic tank owners pay for urban waste water, but city dwellers do not pay for rural waste water.

The second main piece is on drinking water quality, the problems with which are typically overlooked even though they are serious.

The third main article is on water meters. It is summarized in an editorial, and repeats a number of points I made in August. My main concern is the plan for the centralized roll out of water meters. I think that it makes more sense to have people install their own meters and let these meters use the same communication network as the smart electricity and gas meters. See the discussion here.

Conor Pope cites 1000 euro per household per year. I said that. If we maintain the current spending on water (incl. investment), if we keep the business rates for water as they are, and if we exempt those on private schemes from the water charges, then full cost recovery (as required by EU legislation) implies an annual charge of 500 euro per household per year.

There have been strong reactions to the announcement by the Minister of the Environment that he will not be introducing a Climate Change Bill quite yet. See Irish Times (again, and again).

The Irish Examiner has a response by Friends of the Earth: “With seven billion people on Earth, it is more important than ever that we reduce our carbon emissions. Ireland is never going to be the bread basket of the world and we must recognise the profound impacts that climate change will have on food security.” FoE argues at once that Ireland is too small to have an impact on global food supply and so big that is has an impact on the global climate.

(FoE omits that climate change will increase global food supply, at least according to the IPCC, and that biofuels have a negative impact on food production.)

The Irish Times broke the story. The Review of National Climate Policy has yet to be published, so I won’t discuss its contents. It is worrying that the government releases documents to a select few. They then set the public agenda. By the time the public gets access to the document, the news has moved on.

I agree with Minister Hogan that a Climate Change Bill is not a priority. The government has a lot on its plate, including the Department of the Environment — floods, water charges, septic tanks.

Besides, a Climate Change Bill is not required for climate policy. Ireland has had climate policies for many years now, and there is no sign that these policies will be abandoned.

The two draft Bills (discussed here and here) were primarily about creating new bureaucracy and had little to do with emission reduction or adaptation.

Ireland’s emission reduction targets are set by the EU.

UPDATE: The Review of National Climate Policy was published less than an hour after I posted this. It notes that Ireland will probably miss its 2020 targets with current policies, but does not suggest how policy could be reformed. It does not discuss the Climate Change Bill.

Writing in the aftermath of the 2009 floods, I warned that flood and emergency management needed an overhaul lest the waters return. I prefer to be wrong.

The economic damage of the 2011 floods will probably be smaller than in 2009. But this time, two people died. Ciaran Jones was a hero who put himself in harm’s way to help others. Cecilia de Jesus drowned in her home. Why is there no gauge on the Poddle linked to an evacuation alarm?

Flood management is about the prevention of floods. No flood management system is perfect, so emergency management is needed to manage the residual risk. Last Monday, both flood and emergency management failed Dublin.

Ireland is behind schedule to meet its EU obligations to assess flood risks and develop management plans. But why do we need the EU to tell us to protect our property and life? Flood protection design standards are low compared to other countries, and once-in-fifty-year defenses are breached remarkably often. Cities abroad are working hard to create retention basins and drainage channels for storm water. Dublin, a spacious and green city by comparison, has not done so.

Preliminary analysis by Met Eireann shows that the rainfall of the 24^th October in Dublin was not unprecedented. More rain fell on 11^th June 1963 and on 11^th June 1993. A city like Dublin should be robust to events like that.

People have short memories, and politicians even shorter. After each flood, there is a call for better protection. That fades as the waters retract. Priorities change. The recent protest against the Clontarf flood defenses is a good example.

Last Monday also say failures in emergency management. Met Eireann issued a severe weather warning on Saturday. It was not accurate but extreme rainfall is fiendishly hard to predict. The warnings were actually fairly close to what came to pass. But while we have a tried and tested system for real-time weather prediction, we do not have a system that tells us where the water is likely to go once it has hit the ground. In fact, there are few gauges on rivers and streams. For instance, the OPW collection of hydrometric data omits the rivers Dodder, Poddle and Slang, where most of the mayhem was concentrated. The gauges that are there, are not linked to an early warning system.

A gauge on the Poddle would have warned that the water was rising dangerously high. The alarm could have been raised in Harold’s Cross. Celia may have had a chance with a few minutes warning.

A number of county councils now use MapAlerter, a service that sends out email and SMS messages to everybody in a particular area in case of emergency. Dublin does not use this system or any other.

Met Eireann issued a severe weather warning on Saturday. 48 hours later, the keys to flood gates and sand bags were still missing. That is just not good enough. Local flooding occurred to the untrained eye around 5 pm. The weather radar showed more rain coming. The emergency plan was invoked at 9 pm only, less than one-and-a-half hour before high tide. Why so late?

Water moves fast and with force. You have to act before the flood barrier breaks. In 2011, as in 2009, emergency workers followed the water. They did all they could, but there is little that can be done at that stage. Barriers need to be reinforced before they break. People need to be evacuated before the water reaches them.

In Cork and elsewhere, locals have done much to prevent a recurrence of the awful events of 2009. The national government has been less forthcoming. Dublin did not learn from what happened in Cork. The response to the 2009 floods was hampered by the Byzantine structure of flood management at the national level. The 2011 floods were local, and the line of command clear.

And now? Media attention will wane. There will be a few angry debates in the councils and the Dail. We will wonder why a shopping centre was build in a flood plain. We will wring our hands about the lack of accountability in the civil service. A committee will investigate and make sensible recommendations that will be ignored. Instead of waiting for those wise words, it is obvious what needs to done and now is the time to do it.

Early warning systems need to be put in place as a matter of urgency. That is fairly cheap and does not require intrusive intervention to awake the NIMBYs. The government should stop dragging its feet on the catchment flood risk assessment and management programme. Real-time hydrological prediction models must be developed, and not just for fluvial floods.

All this costs money. But Science Foundation Ireland has a large budget, not all of which is spent wisely. Let it fund the best hydrologists in the world to study Ireland. There are harebrained government subsidies in the areas of energy, transport, sport and what not that can be transferred to flood management without any great loss except to the cronies of governments past.

Heavy rains are inevitable. Flood damage is not.

In Nov and Dec 2009, Ireland was hit by extensive floods. Last night, there were floods in Dublin. The damage is probably smaller, but this time a life seems to have been lost.

After the 2009 floods, a number of deficiencies in flood control and emergency management were noted. See Hickey (behind paywall), Oireachtas, Tol. However, as I noted last year, this was not translated into action. More money has been allocated to flood control, but the institutional structures that failed in 2009 have been left unreformed.

In 2009, there were issues with emergency management too. They showed up again last night. There was local flooding from five o’clock onwards, and more rain predicted, but the emergency plan was not invoked until nine o’clock, when river banks had already been burst and with less than one-and-a-half hour to go till high tide. Warnings to the public were late, and little information was provided about what to expect where and when. Twitter was the best source of information, although facts were freely mixed with spoofs, jokes, and bitter disputes about the correct spelling of fliuch.

After the 2009 floods, a number of conferences were organized with speakers from Great Britain on the state of the art in the urban management of pluvial floods. No lessons seem to have been learned.

Anticipation is key in emergency management. If you know where the water will go next, you can move people, goods, and traffic out of harm’s way before damage is done. If all you can do is react, chaos will ensue and damages are unnecessarily high.

The Guardian reports that electric cars are not selling well in the UK.

The CSO does not report sales of electric cars, but it does report “other fuel types” which, by elimination, must mean electric. In 2008, 6 such cars were registered, or 0.004% of all new cars. This rose to 9 (0.017%) in 2009, 23 (0.027%) in 2010 and 45 (0.054%) in the first nine months of 2011.

Hybrids are doing better: 2,600 were sold in 2008-2011, or 0.7%.

The government still aims for one in ten all-electric by 2020 (on the road, not new sales; see Hennessy and Tol (2011, Fig 10) for an estimate of the impact on carbon dioxide emissions). That is roughly 230,000 cars. We’ve bought the first 83. Only 229,917 to go. (The target for 2012 is a more modest 6,000.) .

The ESB has put up a good few charging points. Initially, power was given away for free, but I can’t find evidence that that is still the case. There is a purchase subsidy of 5,000 euro per car, and a zero VRT. The motor tax is 146 euro per year.

Car buyers are apparently not impressed by the subsidies and tax breaks on offer, and the exchequer is not losing any money on this scheme. However, the investment by the ESB is pointless. Instead, they could have paid the money as a dividend to the government.

I was struck by the amount of press coverage of the Cycle to Work scheme (C2W). The Irish Bicycle Business Association (IBBA, which seems to have no website) launched a report (which cannot be found online) praising the virtues of C2W.

The report in the Irish Times is brief. 90,000 bikes have been sold since the scheme was introduced. There is no estimate of how many bikes would have been sold without C2W. The IBBA spokesperson claimed that “cycling journeys have increased by more than 50 per cent”, which may or may not be due to C2W, and may not be true as Irish data on travel and transport are sparse. The Dublin Canal Crossing counts (h/t Ossian Smyth) surely do not support a 50% increase.

RTE, BusinessWorld and the Irish Examiner add that 50 new bicycle shops have been established, and 767 new jobs created. They note the increase in the number of bike-based charitable events. And they cite the example of Temple Street Children’s University Hospital, which apparently has kept excellent records of how its employees travel to work.

SiliconRepublic has the most extensive story. It cites a LSE study that shows the commuting by bike improves your health. Such studies are plagued by endogeneity: Are cycling people fit, or do fit people cycle? McNabola et al. (2008) show, for Dublin, that cyclists (who breathe differently) are particularly exposed to PM2.5 and VOC.

The Irish Independent interviewed a bike shop owner. He notes that, since C2W, people buy more expensive bikes and that the success of his business is due to C2W.

C2W is a subsidy on the purchase of a new bicycle. You would indeed expect that people would then buy more and more expensive bikes, which is good for bike shop owners. C2W was one of the first policies introduced by then-Minister Eamon Ryan, who once owned a bike shop (see here).

C2W is unrelated to the use of the bike. Even without the C2W, bicycles beat cars on cost. I find it hard to believe that C2W has induced many to cycle to work instead, but I am aware that there no data to support this.

Slí Eile asserts that the culture of secrecy is alive and well in policy making in Ireland. Here’s the full essay.

The rest of this post is about a related topic, and the about an irregular commentator to this blog: Pat Swords.

Once upon a time, Pat asked the relevant authorities in Ireland for the benefit-cost analysis that underpins the public investment in wind power in Ireland. This is a perfectly reasonable request, as the public investment is substantial. There are three sources of money: tax revenue, reinvestment of profits by state-owned companies (which could have been paid in dividend to the owners aka the tax payer), and public services obligations (i.e., levies on electricity that are not quite taxes but feel the same way).

Pat’s request was refused, and so started a protracted legal battle, involving the Department of Energy, various other government bodies in Ireland, DG Environment, the European Ombudsperson, and the UN Economic Commission for Europe. There are a number of complications. Pat asked for information that probably should exist but as far as I know does not. Pat requested information under the Aarhus Convention, a UN treaty that was not ratified by Ireland. However, it was ratified by the EU, and Ireland has transposed the corresponding directive. Ireland’s renewable target is similarly derived from EU targets, the justification and even documentation of which leaves much to be desired. Europe part-funded some of the infrastructure that underpins the expansion of renewables. And there are other parts of the Acquis that may pertain to this case.

I’m no lawyer so I will not opine on the likely outcome of the case. I would have used less abrasive language than Pat is wont to. I agree with Pat that the renewables targets are expensive. I fail to understand that there are any benefits from having such a target. I am aware of the long list of wonderful things that are claimed to be benefits of renewable energy. I do not think any of them stacks up.

Most importantly, I think that a democratic government should be open and transparent, and be able to explain how and why it spends our taxes or implements costly regulation. There is often a good reason, or matters may be beyond our control.

If Pat wins this case, the ramifications could be widespread. Renewable energy is surely not the only area in which the Irish government has made dodgy and badly documented decisions. The Aarhus convention only applies, however, to policies that touch the environment.

Here’s the full story. It’s long, complicated, and occasionally intemperate.

The SEAI has released its cost-benefit analysis of the Home Energy Saving scheme, which concludes that for every euro invested, five euros were earned. More money to the SEAI so, and the economic crisis will soon be over.

Intriguingly, the results for the HES are in sharp contrast to the evaluation of the Warmer Homes Scheme — which found that the subsidies had no statistically significant impact on behaviour — and the evaluation of the Green Homes Scheme — which found net losses.

The evaluation of the HES leaves some things to be desired. For optical reasons, it may be better to commission an independent outsider to do the evaluation. Instead, SEAI staff evaluated an SEAI programme.

The cost is assumed to equal the sum of the public and private expenditure. The HES is a price subsidy. It increases the consumer surplus, by less than the total subsidy. The net cost is the difference. Private expenditure does not enter that calculation.

The study ignores changes in producer surplus. These are probably small, if we assume that investment is displaced.

Benefits are the energy savings and the avoided carbon dioxide, . The study assumes that only 18% of the investment in energy saving would have been made without the subsidy. This is in contrast to the Greener Homes evaluation, which finds that roughly half of the investment would have been made anyway, and the Warmer Homes evaluation, which finds that almost all of the investment would have been made without the subsidy.

Energy saved and CO2 avoided are discounted at 4%. If only that were the opportunity cost of public investment.

The study accounts for the VAT paid on energy. Surprisingly, the carbon tax is omitted from the analysis. The HES subsidy is double regulation: Carbon dioxide emissions are taxed, and emission reductions are subsidized. In other sectors of the economy, there is single regulation (carbon tax, or ETS permit price). The HES subsidy thus introduces a distortion in Ireland’s CO2 abatement policy: We abate too much in home energy use and too little elsewhere. This distortion is not quantified in the study.

In sum, this CBA of the HES does not tell us much that is useful. Its conclusions are not supported.

One can assess the HES based on first principles. It is a second-best intervention: Carbon dioxide emission are regulated already. It is an inefficient intervention: It is a fixed subsidy on investment, unrelated to the emissions avoided. It may well be that the HES addresses some imperfection in the market for home improvement (e.g., constrained access to borrowing) but, if so, it is a second-best intervention in that problem too.

If the SEAI had concluded that there was a benefit of 80 cents for every euro invested, I probably would have believed them.

Good news is always welcome. Dublin is the 2nd most Intelligent Community. Who cares it’s Dublin, Ohio? There is a chuckle in the capital, an opportunity to bitch, and as not too many people know about the other Dublin, its reputation adds to ours.

Dublin (Ireland) is ranked 9th (out of 80) on the list of most Bicycle-Friendly Cities in the world. The Lord Mayor rightly called this astonishing. I agree. Any town (that I’ve visited) in Denmark, Germany, and the Netherlands is more friendly to cyclists, including Hamburg (ranked 13th).

The list was put together by Copenhagenize. They do not reveal their methods. Dublin got 12 bonus points for trying, without which it would not have been in the top 20. Dublin’s high ranking is explained by “a wildly successful bike share programme” (true), “visionary politicians” (since booted out of office) “who implemented bike lanes and 30 km/h zones” (although the 30 km/h zone is fiendishly hard to navigate by bike), and “a citizenry who have merely shrugged and gotten on with it” (although the few available statistics suggest that people cycle less and less).

Copenhagenize claims that “[t]he new cycle track along the [Grand] [C]anal is brilliant”. It sure looks shiny and new. It has a small ridge between the road and the cycle line, the sort that was abandoned elsewhere because if you’d hit it accidentally, you’d go head first into traffic. Right of way is confusing. I use one crossing of the new cycle lane on my way back from work. In the few months since it was opened, I’ve spend some 10 minutes there and witnessed four near misses as cars turn on bikes. Fortunately, Dublin bikes are equipped with above-average brakes.

Copenhagenize has used the old let’s-rank-something trick to generate publicity. Unfortunately, they did not add to our understanding of what makes a city friendly to cycling.

The proposed reform of waste collection policy was again in the news today.

The Examiner has a funny story. The proposed reform would cut costs (5,000 people less on the payroll) and increase charges at the same time. The Times is more thoughtful, although it is still curious. In our textbooks, regulators fight against market power. Here, the regulator wants to establish private monopolies and the companies that would likely obtain those are dead against.

Mr Kells issues an implicit threat of court action. Presumably, the companies would argue that they have a customary right and reasonable expectation to compete in any waste collection market.

A lot of the fuss is due to poor communication. As far as I know, the department wants to sell waste collection concessions to the highest bidder, rather than take waste collection back into the public sector (as the private waste companies seem to think).

Here is one way to get around this. Instead of auctioning concessions, they could be grandfathered.

AFAIK, there are four private waste collection companies in DLR. Counting bins on my way to work, I guess that one company has 50% of the market, two have 20%, and one has 10%. DLR should thus be carved into 10 concessions, with 5 going to company A, 2 to companies B and C, and 1 to company D. In two years time, the first concession should be auctioned, the second one two months later, and so on.

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My op-ed in yesterday’s Sunday Times (behind pay wall) expands on last week’s post. Here’s my version of the text:

The proposed reform of waste collection is a step in the right direction. Incineration is needed to meet our EU obligations. A few waste companies will lose money, but other companies and households will be better off.

The Department of the Environment is now moving to change the regulation of waste collection from “competition in the market” to “competition for the market”. Competition in the market does little for lower fees as few households shop around for the cheapest waste collector. Economies of density is another other reason to welcome this move. In my street, we have three bins (black, green, brown) and four companies collecting bins. Every fourth Monday, no less than 12 waste trucks drive up our road to the delight of the children and the annoyance of drivers. Three trucks (one company) could do the same work for a fraction of the cost, as they would spend less time driving and more time collecting waste.

That company would have a local monopoly. Monopolies charge more than competitive companies, but there would be cost savings for households too. Monopoly power is easily checked in this case. Waste collection concessions should be tendered, and granted to the company that guarantees the lowest fees for households. Such concessions should be renewed regularly, say every two years, to keep up competitive pressure.

The proposed change in regulation is a change for the good, therefore. It follows the recommendations in a number of reports, including the International Review of Waste Management Policy, commissioned by the previous Minister, and the Gorecki report of the ESRI.

A level-headed change in waste management is welcome in itself. The previous Minister openly campaigned against government waste policy, but did not change it. This was a source of much confusion and agitation. Investment and renewal in the waste sector ground to a halt. It can now start again.

The most urgent problem is that the European Union has put a cap on the amount of waste that can be landfilled. That cap has been in force for over a year now, but the government has yet to formulate a coherent plan on how to meet the target.

Incineration will be part of the solution. The proposed change in the rules for waste collection has been interpreted as a move to favour incineration. That is nonsense. The markets for waste collection and waste disposal are separate. Some people seem to think that waste collection and disposal must be done by the same company, but there is neither a legal nor an economic reason for this.

A number of Irish waste collectors have diversified into waste disposal, focusing on methods that curried political favour before the last election. Returns in waste collection are not great. Waste disposal looked more lucrative with the EU cap on landfill. That changed with the prospect of a large incinerator in Poolbeg. Incineration is, after landfill, the cheapest way to (legally) dispose of waste. Irish waste disposal companies have complained loudly about incineration – because they know they cannot compete. Waste collectors would be fools not to send their waste for incineration.

The Poolbeg incinerator is not without its faults. There would be few environmental or health concerns if it is properly run, but it is not sure that the Environmental Protection Agency has sharp enough teeth to stand up to a large, multinational company. The incinerator is financed through a mechanism that is, as far as I know, unique to Ireland. If the incinerator turns a profit, the spoils go to the shareholders. If it turns a loss, the taxpayer makes good the difference. The Poolbeg incinerator shares this peculiar model of privatizing gains and socializing losses with, among others, toll roads, renewable energy, and of course banks.

This does mean that the incinerator can charge lower fees if it needs to increase its market share. The Minister decided not to impose a levy on incineration. As there are small external costs from incineration, this is an implicit subsidy. The incinerator will therefore be a fierce competitor in the waste disposal market. Irish waste companies are right to be worried.

At the same time, the reform of waste collection is good news for them. Profit margins should be better if local monopolies are sold through a competitive tendering process.

The tender process should be well organized. That would be a task for the county councils. A number of county councils still run their own waste collection business. It is hard to see that tenders of private companies would get a fair hearing. The tendering should therefore be outsourced to an independent body or the public waste collection businesses should be privatized. The Commission for Utilities Regulation should oversee the tendering.

[UPDATE: See new CEPR paper; h/t Constantin Gurdgiev]

But if the new regulations are properly implemented, households and small companies should benefit. The government is working to reduce the costs of waste collection and waste disposal. Many things can still go wrong, but there is movement in the right direction.

There’s a peculiar piece in today’s Independent. The reports of the CER’s 18 month smart meter trial were published in May.

The trial found statistically and economically significant changes in consumer behaviour due to the introduction of time-of-day pricing, with cost savings for both producers and consumers that together more than offset the costs of metering (unless the wrong communication network is chosen).

The trial also found that in-house displays further modify electricity use, but insufficiently so to justify the additional cost.

Real-time pricing was not trialed, nor were smart devices, micro-generation, electric vehicles, and micro-storage.

Minister Rabbitte responds to an earlier piece by Fintan O’Toole in today’s Irish Times.

It may well be that there are large amounts of oil and gas off Ireland’s west coast. It may well be that, after rapid advances in exploration and exploitation technology, these fields can be developed commercially. That would boost the Irish economy in 15 years time or so.

None of that is certain. It is clear, however, that oil and gas exploration companies have renewed their interest in the Irish part of the Atlantic. The assessment of the 1970s showed that the Irish resources are hard to develop. 20 years of low oil prices and, more recently, the Corrib controversy did not help. But with the current high oil price, the success off Brazil and the promise off Angola, the Irish Atlantic is back into the picture.

This is good news. However, Mr O’Toole and Mary Lou McDonald TD seem to want to kill the goose before it has laid its first egg, perhaps golden. I agree with the Minister. No oil or gas has been struck and this is not the right time to spook companies with talk of high taxes and nationalization.

The Dept Environment is now moving to change the regulation of waste collection from “competition in the market” to “competition for the market”. The reason is simple: Economies of density. In my street, we have three bins (black, green, brown) and four companies collecting bins. Every fourth Monday, no less than 12 waste trucks drive up our road, to the delight of the children and the annoyance of drivers. Three trucks (one company) could do the same work for a little more than a quarter of the cost. Even after allowing for monopoly mark-ups, there would be cost savings for households. Market power would be limited if tendering is competitive and concessions are short (waste trucks are mobile).

A perfectly sensible move by the Department so.

In today’s Irish Times, this is spun (and again) as a way to promote incineration. This is nonsense. At the surface, “competition for the market” was a recommendation in the International Review commissioned by the previous minister, and in the Gorecki report of the ESRI.

The markets for waste collection and waste disposal are largely separated; economies of vertical integration are small. Nonetheless, Irish waste collectors have vertically integrated with waste disposal. The competition in waste collection is such that hardly any money is made. The market for waste disposal would be lucrative with the EU cap on landfill and without additional incineration, but the Poolbeg incinerator would undercut the price of any other disposal technology except landfill. If waste collection would be run as a profit center, waste would be sent for incineration.

Competition for the market will allow waste collectors to make money in their core business again.

I had an op-ed in the IT last Thursday. Discussion is not great on their site. Here’s my edit.

The government aims to create a national water utility to install water meters and charge for water use. The general thrust is commendable, but it may become an expensive failure.

Taxes will need to go up and public spending down to close the government deficit. This will hurt the economy. However, consumption taxes do less damage to growth than income taxes. The government is right to introduce water charges.

A flat water charge would be unfair. Exemptions for those unable to pay are crude and expensive to administer. A flat water charge would not induce water conservation. We produce about 450 liters of drinking water per person per day (l/p/d). The average person probably uses some 150 l/p/d. It is not fully known what happens to the remaining 300 l/p/d. Part is lost through leaky mains, part is used illicitly, and part is lost through leaks in the house or garden. Experience in other countries, and in the group water schemes in Ireland, shows that water charges would substantially reduce household water use. People would also press the water providers to reduce wastage in the distribution network. As the number of meters increases, it will be easier to locate leaks and illicit use. The government is right, too, to introduce water meters.

The government wants to install water meters in 2012 and 2013. That is ambitious: 1.4 million meters in two years, 2800 meters per day. There is also a plan to replace all household electricity meters with so-called smart meters. This has been carefully planned and trialed over the last three years. The smart meter roll-out will be done by well-established companies. In contrast, the installation of water meters is to be led by Irish Water, a company that does not yet exist. I would be surprised if there will be a water meter in every home in Ireland by Christmas 2013. Flat charges may be with us for a long time.

In fact, there is a possibility that water meters will follow the path of voting machines, as learning from past mistakes is not the strongest point of the Irish government.

Water meters will be unpopular, as they remind people of water charges. Installers would need permission to put water meters in the home. Some homeowners will withhold such permission. The idea is therefore to install water meters just outside the property boundary. This is easier but much more expensive. 1.4 million connections will need to found, and 1.4 million holes dug. The water meters would be far from the smart electricity meters and therefore need a separate communications network. This may cost up to €800 per meter (€1.1 billion in total) according to one estimate.

There is a simpler and cheaper option that has worked well in other countries. Households can install water meters themselves, or ask their plumber to. Households with a meter would pay whatever water they use. Households without a meter would pay a flat charge. If the flat charge goes up over time, more and more households will install a meter. If the costs of water meters are a concern – a good plumber could install a certified meter for less than €200 – then Irish Water could give a voucher for €200 worth of free water upon registering the water meter.

The government has repeatedly promised that there would be free water allowances. Only excessive water use would be paid for. This is nonsense. It does not promote water conservation, and it is bad social policy. Like water, food is essential, but the government does not hand out sacks of potatoes. Instead, there are benefits for those without income and tax credits for those with. Benefits in cash are better than benefits in kind, because the household can choose what potatoes to buy, or pasta. Similarly, water should be charged from the first liter onwards. The revenue from the first 100 l/p/d or so should be used to increase benefits and tax credits.

The government may also seek to transfer the responsibility for drinking and sewage water from the county councils to a new, semi-state utility called Irish Water. There is merit in this too. Water treatment plants are largely build, designed and operated by private companies, but guidance and supervision by the county councils has not always been up to scratch. A new national water company would professionalize water management. If assets would be transferred from the counties, Irish Water should be able to borrow money at a lower rate than the government.

There are dangers too. In the past, semi-state monopolies have served their employees and their political masters well – but customers and owners got a raw deal. The government should create a Commission of Water Regulation at the same time as it creates Irish Water.

Or maybe sooner. The prospect of digging 1.4 million holes in the ground is great news for the construction industry – and a number of companies are actively trying to convince the government that this is the only option. It is not. It would be better if all options would be considered, and the best one selected after an open debate.

The fourth one day conference on Economics and Psychology will be held in the UCD Geary Institute on November 25th. The purpose of these sessions is to develop the link between Economics, Psychology and cognate disciplines in Ireland. A special theme of this year’s event will be the implications of behavioural economics for public policy. Abstracts (200-500 words) should be submitted before August 31st to Liam.Delaney@ucd.ie. Selected papers will feature in a special issue of the ESR policy section. Those wishing to have their paper considered should submit a draft before the November 25th session. Final drafts will be submitted for external peer review in January 2012.

The Dublin Kapuscinski Lecture – ‘Climate Change and Development’ on 31st May 2011 at 1700-1900 in the UCD John Hume Global Ireland Institute. R.S.V.P. to Jean.Brennan@ucd.ie 

Website: http://ec.europa.eu/development/services/events/kapuscinski, 

The series is named after Ryszard Kapuscinski, a Polish reporter and writer who was a “Voice of the Poor” in his famous reportages and books covering the developing world.  The lecture series is organized jointly by the European Commission, the United Nations Development Programme and partner universities, in this case TCD and UCD.   Ms Barbara Nolan, Director of the European Commission’s Representation in Ireland will open the Dublin Kapuscinski Lecture 2011 on ‘Climate Change and Development’.

 Professor Dirk Messner, German Development Institute, will deliver the keynote lecture.  “The global development panorama is changing dramatically. The challenges of security and poverty are more interwoven than ever before. Yet, two thirds of the global poor people are now living in middle income countries like China, India and Brazil. What does this new global poverty map imply for European development policies? Development trends are also embedded in an overall global development challenge: - climate change. The world needs to learn to decouple wealth creation from burning fossil fuels. A great transformation to a global low carbon economy is necessary during the decades to come in order to avoid major and dangerous changes in the Earths system. What do these global shifts imply for Europe s role in the world? Europe needs to define its global interests. And it needs to be part of a global governance strategy to shape global development trends.”

 A panel discussion will follow, chaired by Prof. Patrick Paul Walsh (UCD Chair of International Development Studies). Panellists include Francis Jacobs, (Head of the European Parliament Office in Ireland), Cliona Sharkey,  (Trócaire, Environmental Justice Policy Officer), Tara Shine,  (Head of Research and Development, Mary Robinson Climate Justice Foundation, Joseph K.Assan, (TCD-UCD MDP Lecturer in Development Practice) and  Frank Convery ,  (UCD Earth Sciences Institute).

 The lecture series offers citizens of the European Union an unprecedented opportunity to learn and discuss development, and issues related to development cooperation.

The OECD has launched a new index with the aim of facilitating comparisons of the quality of life across countries. You can find the country summaries here.

Ireland does quite well in the rankings, although the usual caveat about using GDP in an Irish context applies.  Moreover, the data used are mostly from 2008 and we have undoubtedly slipped towards the relegation zone since then.