Archive for the ‘Environment’ Category

Climate Change

By Brendan Walsh

Monday, March 31st, 2014

The Intergovernmental Panel on Climate Change (IPCC)’s Fifth Assessment Report (AR5) is available here.
Richard Tol’s critique published in the Financial Times is available here.

Carbon tax breaks for low-particulate fuel

By Richard Tol

Monday, May 6th, 2013

We have learned a few lessons over the years. Monetary policy and market regulation are better done at arm’s length of the government. The generalists in the Dail set the broad goals, but leave the details to quasi-independent technocrats. Macro-prudence is now being added to those broad goals.

Micro is another matter. Policy-makers instinctively reach for the second-best. Sometimes that is the best feasible regulation. Sometimes that creates rents for their clients. And sometimes it is just the force of habit.

The Examiner reports that Minister Hogan suggested that smokeless fuels be given a break on the carbon tax. Really? The carbon tax regulates carbon dioxide emissions. Smokeless fuels and smoky fuels differ in their particulate emissions. A carbon tax break may reduce particulate emissions but would increase carbon dioxide emissions.

A carbon tax break would make climate policy more expensive. Emission reduction is cheapest when there is a uniform price. At the moment, there are three carbon prices: EU ETS, carbon tax, and zero. Hogan proposes there’d be four: EU ETS, carbon tax, reduced carbon tax, and zero. The reduced carbon tax would hold for coal and peat, the fuels that emit most carbon dioxide per unit of energy.

A carbon tax break would also make particulate policy more expensive. At the moment, there is a range of regulations including technical standards (e.g., in transport) and local bans (e.g., on selling smoky fuels in cities). A tax break would add yet another layer of regulation. The impact on costs is predictable: They will rise as any move away from first-best regulation does (Tinbergen 1952).

The impact on emissions is unknown. There are two substitution effects: (1) smoky -> smokeless coal and peat; and (2) oil and gas -> coal and peat. The carbon tax break would apply to all smokeless fuel, not just to smokeless fuel sold in places where smoky fuels are banned. Smokeless fuel use may increase more that smoky fuel use falls.

Recall that smokeless fuels are not particulate-less. There are no visible emissions. Invisible particulates, the ones that do real damage, are emitted nonetheless.

If Minister Hogan wants to reduce particulate emissions, he should impose a particulate tax (and abolish the ineffective sales ban) or extend the sales ban to the entire country.

Where in Donegal?

By Richard Tol

Tuesday, April 23rd, 2013

This document reached me by way of the European Commission. It shows that some people are working hard to convince the Commission that Bogtec is a transnational infrastructure project of European importance (and thus qualifies for subsidies). It also shows that the Spirit of Ireland refuses to die.

There is mention of a glacial valley near Kilcar, Co Donegal. A dam, 1300 meters wide and 120 meters high (in the middle), would create an upper reservoir with a surface of 4 squared kilometers; assuming that the valley is triangular, the reservoir would be 6150 meters long. The sea would be the lower reservoir. Surplus wind power would pump the water from the sea into the reservoir. Releasing the water back into the sea, power would be generated when there’s demand.

I’ve been hiking in Donegal only a few times. Is there a glacial valley near the sea, of the above dimensions, uninhabited, and not full of archaeological treasure?

UPDATE: I’ve had one vote for Glenaddragh River Valley, which is a good way from the sea.

UPDATE2: Another correspondent forwarded this map, discussed by Donegal County Council. The hydro plan was apparently rejected as it failed to meet the requirements of the SEA Directive on procedural grounds.

Swords v DCENR

By Richard Tol

Saturday, April 20th, 2013

The case of Pat Swords versus the Department of Energy etc continues. See here and here for its history. The media is strangely quiet. At stake is an injunction to halt the National Renewable Energy Action Plan (NREAP), but this case has ramifications for all relations between the rulers and the ruled, and for Ireland’ sovereignty.

There have been two sessions of the High Court, one on April 12 and one of April 16.

State argued that the case should be thrown out because the Aarhus Convention does not apply as it had not been ratified at the time the NREAP was accepted by the European Commission in 2010. This argument was rejected. Even though Ireland did not ratify the Aarhus Convention until 2012, the European Union had ratified it in 2005. Therefore, Ireland must comply with Aarhus.

Read that again: Ireland is subject to an international treaty it did not ratify.

The session is adjourned till June. State now has to engage substantively with the ruling of the Aarhus Compliance Committee, which has that Ireland failed to properly inform its citizens about NREAP and its impact and did not allow them sufficient time to engage with policy making.

Ireland v Pat Swords

By Richard Tol

Monday, March 4th, 2013

It has been several years since I first came across Pat Swords. Pat demanded access to wind energy modeling work that he thought the ESRI had done but not published. There were many layers to our reply. The ESRI is not covered by Freedom of Information legislation. At the time, Ireland had not yet ratified the Aarhus Convention on Access to Environmental Information, so that did not apply either (but see below). Although it would have been appropriate for the ESRI to do a detailed study of the pros and cons of subsidizing wind energy, we had not. And no, we were not aware of someone else having done such a study either. There is no ex ante evaluation of wind energy subsidies in Ireland, and no ex post evaluation either. (And lest people protest, I am aware of a number of partial studies, and a number of not-independent ones.)

Pat lost interest in the ESRI, but not in wind policy. He asked every institution in Ireland he could think of “why do we subsidize wind?” Some replied in the vein of “because we do, now go away”. Others did not respond. So Pat asked the European Commission, with the same result. Although we do generously subsidize wind power, no official was able to satisfactorily answer why.

So Pat went to the United Nations. It first ruled that, because the European Union has ratified the Aarhus Convention and because wind policy is dictated by Brussels, Ireland’s wind policy is bound by the Aarhus Convention – a treaty Ireland had not ratified at the time.

The Aarhus Convention is not at all about wind. It is about public policy. The Aarhus Compliance Committee ruled that Ireland had failed to give its residents a proper say in the National Renewable Energy Action Plan (NREAP). Two failures were identified. First, there was insufficient information to inform a reasoned decision. Second, there was insufficient time given to deliberate and, if need be, protest.

The Committee did not say whether wind power is good or bad. It did say that decisions on wind power are dodgy.

This is a remarkable result in and of itself. The Irish government cannot justify policy decisions with a few half-baked arguments and ram it through the Dail. It often does, but there is now a precedent to call an end to such practice.

The story does not end here. Pat took the UN ruling to the High Court and asked for a judicial review of the NREAP. The judge agreed that there is prima facie evidence that things are not kosher and called a hearing, which is due to reconvene on March 13.

The government’s defense is that Pat’s protest comes far too late, ignoring that all his earlier protests were put aside and ignoring the UN ruling that insufficient time was granted in the first place. The government also argues that the EU has accepted the NREAP, ignoring that the UN ruled that the European Commission was just as much in the wrong as the Irish government.

Inexcusably, the government asked the court to be granted legal costs if they win. If he loses, Pat may have to pay the government’s lawyers.

Such bullying tactics may soon come to an end through another lawsuit, but they have not yet. It is immoral, though, that the mighty government seeks to throttle a judicial review by threatening to bankrupt a citizen who exercises his democratic right.

The government’s behaviour suggests that it knows it cannot defend its case for subsidies for wind power. Carbon dioxide emissions from power generation are indeed already adequately regulated by the EU Emissions Trading System. There is no reason to put subsidies on top. Many Irish households and companies would probably welcome cheaper electricity.

Pat comments on this case here.

More on Bogtec

By Richard Tol

Friday, March 1st, 2013

Pat Swords has a post on Bishop Hill on Bogtec. Pat reveals (1) that the European Commission intends to pay for part of the infrastructure and (2) that the European Commission does not have or does not want to share the impact assessment that shows that such an investment is indeed a wise investment.

See also Bogtec and Bogtec (ctd)

Bogtec (continued)

By Richard Tol

Tuesday, February 19th, 2013

The recently signed Memorandum of Understanding between Ireland and the UK on wind power has led to excited talk of tens of thousands of new jobs and billions in tax revenue and expert earnings. How realistic is that?

The Memorandum itself is silent on the implications of the deal. Pat Rabbitte and Ed Davey agreed to negotiate a treaty under the Renewables Directive. There are targets for renewables for all Member States of the European Union. Some countries will easily meet these targets, but most won’t. Under the Renewables Directive, Member States with a renewables surplus can sell this to the highest bidder or to an exclusive buyer.

Ireland may have more wind power than it needs. Ministers Rabbitte and Davey intend to enter into an exclusive agreement. This is obviously attractive to the UK. It is not obvious why Ireland would want this, rather than let the Brits compete against the French and the Poles. The first contours of the plan emerged shortly after the UK offered soft loans to bail-out Ireland’s public debt.

The UK cannot meet its renewables obligations. It cannot ignore these targets because the coalition is fragile enough and relations with Brussels already tense. Great Britain has plenty of wind, but people have effectively used the planning system to stop the erection of new wind turbines. So, the plan is to build turbines across the Irish Sea and transmit the power via a dedicated grid to England and Wales.

The Midlands are the leading candidate to build these new turbines. The plan is therefore known as Bogtec, after a similar plan involved the Sahara called Desertec. New wind capacity may amount to 5,000 MW. The current installed capacity is 1,700 MW.

Long distance power transmission is expensive. The East-West Interconnector cost 600 million euro. It has a capacity of 500 MW. Similar interconnectors elsewhere cost 200-300 million euro. Assuming that the Brits will not pay for gold-plating, the bill for the undersea cables alone would be 2-3 billion euro.

The delayed new North-South Interconnector will have a capacity of 400 MW. People are already up in arms against the planned pylons. Transmission from the Midlands to the sea will need 12 times as many pylons.

The potential benefits of Bogtec for Ireland are unclear. The more optimistic estimates aim to impress voters and politicians. Wind power does not generate a lot of employment. Estimates often ignore the jobs lost in thermal power generation, and the jobs destroyed by dearer electricity and higher taxes. There certainly are jobs in “sandwiches and concrete” as Pat Rabbitte put it. The more attractive jobs, however, are in manufacturing and in designing new turbines. There is overcapacity in wind turbine manufacturing, so companies would hesitate to build a new plant in Dublin Port – even if Ireland would suddenly discover its talent for mechanical engineering.

Export earnings depend on the selling price. The REFIT tariff in England and Wales is 25 c/KWh for small suppliers. The retail price of electricity is only 18 c/KWh, the wholesale price 6 c/KWh. If Irish wind farmers are paid the wholesale price minus the cost of transmission (2 c/KWh), revenue will be around €0.5 billion per year. Higher revenues will be at the mercy of the generosity of British subsidies.

If manufacturing jobs are in Denmark and revenues low, the government will not see much tax revenue. No royalties are paid on wind. Bogtec does not appear to be a great deal for Ireland.

Wind farms have real costs. They can spoil the landscape, affect wildlife, and disturb people living nearby. Do the benefits outweigh the costs?

There is not much information on Bogtec. The government has yet to publish an impact assessment, but it protests only meekly against the fantastical claims put forward by companies hoping for subsidies. Evidence is not the strongest point in Ireland’s energy policy. Paul Hunt has shown that energy policy in Ireland is run for the benefit of the state-owned energy companies and their workers, Minister Rabbitte disagreed. Mr Hunt’s analysis is based on data. Mr Rabbitte promised data, but has yet to deliver.

People that could be affected by the new turbines fear that planning regulations will not protect them. Indeed, Bogtec exploits the difference in planning between England and Ireland. The UN has ruled that Ireland’s National Renewable Energy Action Plan violates international planning standards. The High Court has agreed to hear this case in March.

Bogtec is a good deal for Britain.* Is it a good deal for Ireland too? We need to know before we proceed. Why is an exclusive deal with the UK better than selling to the highest bidder?  Is Bogtec related to the bail-out? Will the Irish government or state-owned companies invest money in Bogtec? What is the expected rate of return? What if UK subsidies are less generous? Will planning properly protect households? In the past, the Irish government repeated sleepwalked into a bad deal. It is time to kick that habit.

* Well, it is a good deal for Britain given the corner it has painted itself into. Without political constraints, the best solution would be to ditch the Large Combustion Directive and replace coal with gas over a 15 year period or so.

Bogtec

By Richard Tol

Friday, January 25th, 2013

Yesterday, Pat Rabbitte and Ed Davey signed a Memorandum of Understanding. The MoU is crafted in terms of the Renewables Directive, which allows EU Member States to pool their targets. Essentially, the MoU gives the UK an exclusive claim on any excess (wrt target) renewables that Ireland may have. A monopsony is good for the buyer, but less attractive to the seller. Either the Irish government has little faith in the emergence of a market for renewable obligations, or perhaps Ireland felt it needed to do the UK a favour, for instance in return for the bailout.

The MoU does not specify any project, but there is an expectation (see here and here) of large wind farms in the Irish midlands, transmitted to England and Wales via a dedicated grid.

This is intriguing. Midland winds are not particularly favourable, and definitely cannot compete with the winds of England and Wales once the costs of long distance transmission, including an undersea cable, are accounted for. This project only makes sense when you consider the difficulties in building wind turbines in the England and Wales. Ireland’s comparative advantage is the weakness of its planning regulations.

There have been some exaggerated claims about the benefits for Ireland. Few jobs would be created here. There is no reason to assume that wind turbine manufacturers would set up shop in Ireland. Even the more lucrative parts of construction may well be done by specialist teams flown in from abroad.

Export earnings depend on the price. In England and Wales, feed-in tariffs are about 25 c/KWh for small, domestic suppliers. It is unlikely that large, foreign suppliers will be offered similarly generous conditions.

Profits are likely to be taxed in Ireland, but need not benefit Irish shareholders. There are no royalties on wind (and EU competition law prevents the introduction of royalties on wind-for-export only).

The wind power companies would need to lease land, but as the name of Bord na Mona is often dropped, this may be at a concessionary rate.

From an English perspective, this agreement makes sense in a narrow way. The choice is between yet another conflict with Brussels (if the renewables target would be ditched — the sensible thing to do), a reform of planning regulations, or a deal with the Irish.

From an Irish perspective, it is hard to find anything to commend this plan.

Doha

By Richard Tol

Monday, December 10th, 2012

As predicted, the 18th Conference of the Parties to the United Nations Framework Convention on Climate Change did not bring much, despite the arduous effort of most of the 17,000 delegates in Doha. The Doha Gateway Package promises that a new treaty will be negotiated by 2015. The 2007 Bali Roadmap promised the same, only to fail two years later in Cancun. I predict that the Paris negotiations will not deliver either.

Doha did extend the Kyoto Protocol from 2015 (as agreed in Durban) to 2020. The Kyoto Protocol is now a European affair, with Australia as an honorary member. The emissions targets agreed in Doha are the same as the targets adopted a long time ago in Brussels.

Doha did agree to end the twin-track negotiations, with one track for Europe to do what it wants and another for the rest of world to be in deadlock. Europe will join the deadlock so.

At the moment, donor countries divert development assistance to climate aid, meant to reduce overseas emissions and help poor countries adapt to climate change. (By the way, development assistance also pays for the international travel of Ireland’s climate negotiators.) In Doha, there was much talk of changing these voluntary contributions to mandatory ones, based on some form of accountability.

Needless to say, the USA are dead against any admission of liability. China’s position will rapidly change once they realize that they are the greatest contributor to climate change since 1992, when climate change was internationally recognized as a problem.

Today’s editorial in the Irish Times paints a different picture. However, the EU did not take on further commitments to reduce emissions. Sandy and Bopha cannot be attributed, either physically or statistically, to climate change.

The Irish Times also calls for a Climate Bill. Draft Bills would have created new bureaucracies, but would not have contributed to emission reduction (as argued here and here).

Climate policy does not need bureaucrats. A carbon tax would work just fine. I was therefore pleased that as of Budget2(0)13 solid fuels will no longer be exempted from the carbon tax. Let’s hope that the fiscal problems elsewhere will force other countries to follow Ireland’s example and introduce a carbon tax too. It would be even better if austerity would cull the excessive numbers of climocrats.

The Swords is mightier

By Richard Tol

Friday, November 16th, 2012

The saga of Pat Swords v The World continues to unfold. Not content with having the UN-ECE Compliance Committee of the Aarhus Convention declare that EU renewables policy violates procedural obligations with regard to sound policy making, Pat has now sought, and found, a legal review of the Irish implementation of that policy, specifically, the National Renewable Energy Action Plan and the REFIT scheme. The case will be before the High Court on January 15.

To be continued.

Exporting electricity

By Richard Tol

Tuesday, May 29th, 2012

UPDATE2 Over on Twitter, Antoin argues that the plan as interpreted by me would violate EirGrid’s statutory monopoly.

Minister Rabbite yesterday announced plans to export wind power to Great Britain. This is a result of the energy summit organized shortly after the last elections. It now appears ready for public discourse.

The plan is simple. Build a load of wind turbines in the Midlands, where the relative lack of wind is made good by the relative lack of tourists and nature reserves, on land owned by Bord na Mona and Coillte. Build dedicated transmission lines to Great Britain. (The Spirits of Ireland hope that there will be pumped storage as well.)

The plan makes half sense from an English perspective. It is hard to get planning permission for onshore wind turbines in Great Britain. Onshore in Ireland plus transmission is cheaper than offshore in British waters. On the other hand, the plan is driven by the EU renewables target, which is pretty tough on the UK. With Germany abandoning its green energy plans (following earlier such decisions by Portugal and Spain) and with Theresa May wishing to ban Greeks from the UK, it is not immediately clear why the UK obeys the EU with regard to renewables.

It is not clear what is in it for Ireland: English-owned turbines generating power for England, transported over English-owned transmission lines. Dedicated transmission means that there are no benefits for Ireland in terms of supply security or price arbitrage. If the new transmission would be integrated into the Irish grid, Irish regulations would apply — and subsidies too, so that you Irish would sponsor my electricity bill. Ireland does not have royalties on wind power or transmission (and if it would, the same royalties should be levied on Irish turbines and power lines). That leaves some jobs in construction, fewer in maintenance, and 12.5% of whatever profits are left in Ireland for taxation.

It may well be that this plan is a quid pro quo for the UK contribution to the bailout of Ireland.

I am not convinced that the plan will go ahead. The English power market is in turmoil, and the companies may not be interested in an Irish adventure. Recall that the UK government also confidently announced that private companies would build new nuclear power. Well, they did not. The comparative advantage of Ireland in this case is the relatively lax planning regulations. Pat Swords may have put an end to that. But even the current planning regime can be used to block to an English adventure with no Irish spoils.

It is early days for this project still. It is worrying that the minister seems to think that more state intervention is required, and that the state still has money to waste. UPDATE: Paul Hunt points out that it is indeed the Government’s plan to intervene and subsidize: See the new energy strategy.

More academic thoughts on interconnection are here.

Pat Swords v The World

By Richard Tol

Monday, May 14th, 2012

The UN-ECE Compliance Committee of the Aarhus Convention has now ruled in the case Pat Swords v European Union. The ruling has implications far beyond this case.

To recap, Pat is no friend of renewable energy. He complained about the government’s renewable energy policy to every authority in Ireland and was either ignored or told to go away. So he complained to every European authority with the same result. And so he complained to the United Nations Economic Commission for Europe under the Aarhus Convention on Access to Information, Public Participation in Decision Making and Access of Justice in Environmental Matters.

In February 2011, the Committee admitted Pat’s complaint. This is significant. Ireland did not ratify the Aarhus Convention. The EU did, however. Because Brussels handed down its renewable energy policy, Dublin is bound by Aarhus.

This sets a precedent. Any Irish policy that is somehow proscribed, inspired, or constrained by EU policy, is now subject to Aarhus.

The Committee has now issued its draft ruling. It is long and complex. It is silent on the policy itself. On procedural issues, two points stand:

  • Ireland made a mess of its public consultation on the National Renewable Energy Action Plan.
  • The European Commission failed in its duty to supervise Ireland.

So

  • Anything in the NREAP can now be challenged.
  • Consultation on the NREAP was not pretty, but it was not particularly ugly by Irish standards either. Other government plans can now be challenged too.
  • And the EU has been told to intrude more.

The hidden depths of the water charge

By Richard Tol

Monday, April 23rd, 2012

as submitted to the Sunday Business Post:

In a somewhat haphazard style, the government this week announced more details of its reform of the water sector. Unfortunately, the plans are about as well-crafted as the announcements.

People focused on the revelation that Father Christmas will not bring water meters this year. Instead, water meters will have to be paid for. It does not matter much whether households pay upfront or over time, through higher taxes via the Department of Finance, or through lower pensions via the National Pension Reserve Fund. Households will pay.

How much will households pay? A basic water meter costs €60, a fancy one €150. (The government appears to have picked the latter model.) An experienced plumber can fit a meter in 15 minutes or so. This is not terribly expensive, but many people are hard-up.

The government, however, does not trust households to install their own meters. The government could use a flat charge for people without a meter and a volumetric charge for people with a meter. If the flat charge is high enough, many will install a meter. This is a common arrangement in other countries. It is perfectly fine with the EU, ECB and IMF.

The government does not want to give people this choice. Ireland will be one of the first countries in the world with universal water metering. The government has yet to publish the cost-benefit analysis that shows that this is indeed the best bang for what little buck is left.

Because the government suspects that some people will not be happy to have their water metered and charged – and may thus refuse the government’s plumbers access to their house – the plan is to install water meters just outside the property, on council land.

That means what holes will need to be dug. The exact location of water pipes is not always known, so there may be some searching involved. Furthermore, water meters will be far from the smart electricity meters that the ESB is installing everywhere. Water meters therefore cannot piggy back on the communication network that the ESB is also putting up. Water meter readings will be collected separately.

All this makes water metering rather expensive. The government is not very forthcoming with its estimates, but it will be at least €500 per meter. The government will be happy to lend you that money – in fact will leave you no choice – so that a few hundred euro in interest should be added.

It is easy to get excited about such details – why pay €800 or more for something that can be had for €200 or less – but they distract from the bigger picture. Water meters are only the beginning. Water is metered so that it can be charged.

The government is tight-lipped about what the water charges will be. The EU Water Framework Directive is clear. Water charges should fully recover the cost of drinking water provision and waste water disposal. Ireland spends about €1.2 billion per year on water. Only some €200 million is recovered from non-domestic users. The total amount that will need to come in through household water charges is therefore €1 billion per year – or, not counting those with private or collective wells, €560 per household per year.

Unmetered households in countries similar to Ireland use about 150 litres of water per person per day. Full cost recovery implies that the water charge would be about €3.80 per thousand litres. As metering and charging reduce water use, typically by about a third, Uisce na hEireann would be quickly forced to increase the water charge to €5.70 per thousand litres.

The government has repeatedly promised that each household will get a generous allowance of free water. This is not clever. Again, the government has left us in the dark about the size of the allowance. If it is 100 litres per household per day, the water charge would be €9 per thousand litres. If the allowance is 200 litres, the water charge would be €22.

And therein the problem lies. Uisce na hEireann will supply water to households. The free water allowance will be for households. Small families will get all their water for free. Big households will pay through the nose. The minister will spin this as a boon to little old ladies living alone. A family of four would pay €800 per year without a free allowance but €1600 with. This is a baby tax.

Uisce na hEireann could only give a free water allowance per person if it would track how many people are present in a household.

The free allowance is best done without. Water charges place a disproportionate burden on the poor. Therefore, water charges should be raised and Uisce na hEireann should pay a dividend to the government, which should be used to increase benefits and tax credits. Not everyone would trust the government to pass on that dividend. Uisce na hEireann could have been mutualized, with every man, woman and child in Ireland owning an equal share.

Instead, Uisce na hEireann will be a subsidiary of Bord Gais Eireann (BGE). The government did not want to create a new state company, and it did not want to call on the private sector. That left little choice. BGE has a sound track record in providing households with gas, and it has successfully added electricity. BGE should be well able to deal with the retail side of Uisce na hEireann.

But Uisce na hEireann will do more than charging for water. It will run the water network and the treatment plants. BGE has diversified into wind power, an unfortunate decision which led to a downgrade of its credit rating. BGE loses money on its gas-fired power plant because it relied on in-house knowledge rather than external expertise. Let’s hope BGE has learned from this, because not anyone can run a sewage treatment plant.

Any manager would lose sleep over Uisce na hEireann. 34 local water boards will be merged to form a national company, with 34 different IT systems, 34 different model contracts with suppliers and operators, and 34 different labour regulations. 32 counties will transfer their water assets to Uisce na hEireann. Uisce na hEireann may initially employ 4,000 people, compared to the 1,000 people that now work for BGE proper. Was it wise to limit the competition for Uisce na hEireann to BGE and Bord na Mona?

Uisce na hEireann will be regulated by the Commission for Energy Regulation (CER), presumably soon to be renamed. The CER is struggling. It is wedged between the minister for energy qua policy maker and qua owner of the dominant companies. It has to deal with the far-reaching reforms of the energy market imposed by Brussels. And now its remit will be extended from energy to energy, drinking water, and sewerage. The CER cannot expect additional resources. Will it cope?

The government has embarked on a transformation of the water sector. That is welcome, in principle. It is unfortunate that options are not thoroughly scrutinized before decisions are made. The public debate has been distracted by the minor question how meters will be paid for.

Irish Water (again)

By Richard Tol

Monday, April 23rd, 2012

I had an op-ed in yesterday’s Business Post, together with a raft of other pieces. The points raised should come as no surprise to those who read Morgenroth’s and my earlier blogs. Conor Pope independently confirms our numbers. Summary:

  • The government plan for water meters is exceedingly expensive.
  • Free water allowances are a bad idea, particularly if the allowance is per household (as is likely) rather than per person.
  • Is Bord Gais up for this? Can the Commission for Energy Regulation cope?

The Sindo also wrote about Irish Water, which highlights another issue: Bord Gais is not fully state-owned. Employees own a fair chunk too. An uncompensated transfer of water assets from the counties to Irish Water would be a windfall for Bord Gais employees, a capital gain that will be taxable at some point in the future. It would be better if Irish Water would pay a fair price for the assets, funded by newly issued equity. The county councils would then be part-owner of Bord Gais, which would further complicate the planned privatization of part of the company.

ESRI Environmental Economics Seminar

By Edgar Morgenroth

Friday, April 20th, 2012

Venue: The ESRI, Whitaker Square, Sir John Rogerson’s Quay, Dublin 2

Date: 03/05/2012
Time: 9.00 -13.00

This seminar will present some of the latest research undertaken by ESRI researchers as part of an Environmental Protection Agency (EPA) funded project. A range of topics will be covered, including surface water quality, transport and energy.

Agenda

9.15     Introduction

9.30     Towards Green Net National Product: A Summary of modelling and other output - Edgar Morgenroth

10.0 The Impact of Land Use on Lake Water Quality in Ireland 2004-2009 - John Curtis and Edgar Morgenroth

10.30 The value of domestic building energy efficiency – evidence from Ireland - Marie Hyland, Ronan Lyons (U. Oxford), Anna Alberini (U. Maryland) and Sean Lyons

11.00 Coffee Break

11.30 An Analysis of Non-Commuting Travel - Aine Driscoll, Edgar Morgenroth and Anne Nolan

12.0 Estimating the Impact of Time-of-Use Pricing on Irish Electricity Demand - Valeria di Cosmo, Sean Lyons and Anne Nolan

Booking

To register to attend this Seminar, please register here.

View map and how to find us.

If you would like to receive our monthly eNewsletter with news of ESRI activities and publications, please subscribe here.

Yet more on water meters

By Edgar Morgenroth

Wednesday, April 18th, 2012

Prime Time last night showed a few clips of me commenting on the establishment of Irish Water. As is usual (given the time constraints) a lot of my interview was not included. There are a few points worth making:

(more…)

Water meters (ctd)

By Richard Tol

Tuesday, April 17th, 2012

Would you rather

Apparently, only Bord Gais and Bord na Mona are still in the running for Irish Water. One has lost focus, the other is in search of a mission. Not an easy choice.

This follows on yesterday’s post.

Water meters and all that

By Richard Tol

Monday, April 16th, 2012

Ireland is not Greece. Ireland, for instance, does not have a problem with tax collection. Or does it? There clearly is a problem with collecting the household charge. To my mind, the core issue is that the Department of the Environment — which has limited experience with indirect taxation and none with direct taxation — tries to do something for which it was not set-up to do — and refused to call in the experts. Like all departments, Dept Env was already stretched because of the austerity programme.

The household charge is flat: 100 euro per residence. It is easy to determine who should pay. Is it a residence? Are you the owner? If yes and yes, you should pay 100 euro.

The household charge should, at some point in the future, morph into a property tax. There are two key differences. The property tax will be differentiated: More valuable properties would be taxed more. And the property tax will be much higher than the household charge: somewhere between 500 and 1000 euro per household on average.

If Dept Env struggles with something so simple as a low household charge, how will it cope with a more complicated and much higher property tax?

The next episode of the saga re-emerged in the news today: Water meters (1, 2, 3). Households will / will not pay for the installation of water meters. If so, payments will be up front / distributed over the years. If not, the Dept of Finance / National Pension Reserve Fund will make up the difference, perhaps as a soft / commercial loan to Dept Env / households. Installation will cost at most 300 euro per meter / at least 300 euro per meter / not yet known.

The semi-state that is to implement water meters, Irish Water, was supposed to start in early January. It is now mid April and plans are not yet definite. It is not even known whether Irish Water will be an independent entity or a subsidiary to Bord Gais or Bord an Mona. The National Roads Authority is apparently no longer in the running, and private companies (Veolia, Tesco) were never considered. As perhaps 4,000 county council staff may be transferred to Irish Water, it may want to recruit from the HSE to draw on their expertise in forging a national entity out of disparate regional ones.

This matters. Water meters are part of the ECB/EU/IMF agreement and the Water Framework Directive. As long as there is no Irish Water, Dept Env will fulfill its duties in the interim — duties that are beyond its actual remit. I worried about that in January. This piece has an intriguing remark at the end. Apparently, at least one county council is rushing through decisions, preempting the presumably stricter regulatory regime expected under Irish Water and the Commission for Energy (and Water) Regulation.

As I have argued before, there is an advantage to electing competent managers (rather than school teachers) to the Dail, as TDs may become ministers in charge of sprawling bureaucracies. Of course, it would help if the higher echelons of the civil service would have similar competencies.

Septic tanks

By Richard Tol

Tuesday, February 7th, 2012

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.

Towards Irish Water

By Richard Tol

Tuesday, January 17th, 2012

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.

McDonald in Nature

By Richard Tol

Thursday, December 15th, 2011

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.

Durban: Jobs and climate

By Richard Tol

Sunday, December 11th, 2011

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.

Gormanston, Tarbert and regulation

By Richard Tol

Thursday, December 8th, 2011

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.

Environment news roundup

By Richard Tol

Wednesday, November 30th, 2011

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.

Reform of household energy policy

By Richard Tol

Monday, November 28th, 2011

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.

COP17 in Durban

By Richard Tol

Monday, November 28th, 2011

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.

Revealed preferences for climate

By Richard Tol

Saturday, November 26th, 2011

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.

Green growth

By Richard Tol

Saturday, November 12th, 2011

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.

Erratum: An fliuch mor

By Richard Tol

Friday, November 11th, 2011

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 provision of water services

By Richard Tol

Wednesday, November 9th, 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.