Shadow Price of Carbon
Full Transcript:
Question: Deputy Marc Ó Cathasaigh asked the Minister for Public Expenditure, National Development Plan Delivery and Reform when the revised and increased carbon pricing will be published; if there is a particular barrier to its publication; and if he will make a statement on the matter. [52341/23]
Deputy Marc Ó Cathasaigh
A number of parameters are set out in our public spending code as to how the State makes decisions about spending money on behalf of our citizens. One deficiency in that code, which I raised recently at the Committee of Public Accounts, relates to how we factor in greenhouse gas emissions. When will the revised and increased carbon pricing be published? Is there any barrier to its timely publication?
Deputy Ossian Smyth
As Ireland has committed to achieving ambitious greenhouse gas emission reduction targets, with key milestones in 2030 and 2050, the Government’s assessment of any new investments it is considering making should consider the impact these investments will have on greenhouse gas emissions. Including a valuation of the cost that will be borne to eliminate any emissions a project may give rise to in an economic appraisal is a means of doing this. Placing a value on greenhouse gas emissions allows the economic appraisal to include the full impact of the benefits of projects that will reduce such emissions.
In 2019, my Department reviewed the methodology used to derive the shadow price of carbon and updated the values applied in public sector economic appraisal. However, since 2019 Ireland’s climate targets at both national and EU levels have increased significantly in ambition. Therefore, the national development plan review committed my Department to revising the shadow price of carbon in the infrastructure guidelines in light of Ireland’s enhanced climate ambition.
At the request of my officials, the marine and renewable energy institute, MaREI, in UCC has carried out the analysis needed to inform this work. In addition, my officials have worked with the OECD to ensure the climate aspects of the infrastructure guidelines are robust and reflect best practice internationally. This work is complete and proposals for the revision of the shadow price of carbon are at the final stage of development internally.
Deputy Marc Ó Cathasaigh
That was an interesting history lesson on how and when we might arrive at something but I did not quite get a clear answer on when we actually will see it. One of the problems of dealing with pollution and its impact, be that carbon emissions or otherwise, is that while the benefits might be privatised, the costs are socialised. The use of our atmosphere is a classic case of tragedy of the commons, in that we are facilitating a fossil fuel society while outsourcing the impact of those emissions.
The Minister of State probably has a figure we will finally arrive at. I was looking at The Economist this week. The American Government puts the socialised cost at around $51. The US environmental protection agency puts it at $190. The EU ETS scheme is around €80. That is a really wide range and, depending on the number picked, will deliver wildly difficult outcomes in terms of what projects we decide to fund or not fund. When am I likely to see the shadow price of carbon?
Deputy Ossian Smyth
The updated guidelines on the shadow price of carbon will be published by the end of the year. The Deputy discusses the different ways to measure the price of carbon. He is absolutely right. We could use the emissions trading scheme price, which changes all the time on international markets, or look at what the carbon tax is set at.
One thing to be considered is that it is not just one number. The Deputy said I probably had a number in mind that I would arrive at. In fact, there is a different price of carbon every year going into the future. As time goes on and we manage to decarbonise society, we start with the cheapest ways to do it. In the years ahead, it gets more and more expensive. Avoiding a tonne of carbon in 2030 is worth far more money than it is in 2023. The carbon tax is set to escalate. That is already in law. By 2030, it will be €100 per tonne. That is one price that can be used. The future price of an ETS allowance is another price that can be used.
Deputy Marc Ó Cathasaigh
The following is supplemental, so the Minister of State might not have it to hand. His senior Minister recently said the public spending code will be replaced by a set of infrastructure guidelines. Will the Minister of State confirm whether we are talking about an amendment to the public spending code or a wholesale rewriting of it?
Deputy Durkan’s comments were not about swans and snails; it was – I cannot remember – vertigo something or other. Notwithstanding those comments, Natural Capital Ireland, which I hosted recently for a briefing in the audiovisual room, has done good work on how we can turn. I talked about greenhouse gas emissions but there is also the impact of our public spending code and public projects on natural capital and the natural world. Natural Capital Ireland is doing interesting work on how we can translate the worth – if one can really translate it – of the vertigo integrator, I do not know what the hell—–
Deputy Bernard J. Durkan
Deputy Marc Ó Cathasaigh
Is it inquisitor? It sounds like being held over a building but translating that into a figure that makes sense on a balance sheet is important and could stand alongside the shadow pricing of carbon.
Deputy Ossian Smyth
The public spending code is being revised, restructured and simplified. The infrastructure guidelines are being updated since they were last issued in 2019, the ones that relate to the shadow price of carbon. I think the Deputy is alluding to the shadow price of nature as well. Biodiversity has a value. That probably would have been a strange thing to say ten years ago but people understand now that nature is worth something, including in terms of our quality of life. If you have an economic project involving the destruction of some of our natural heritage, you have to work that into the plan and decide if it is worth it. It is not something you get for free. It is valuable to society. Everybody in Ireland puts a high value on nature and on access to forests, lakes, bogs and so on. It is a good point the Deputy raises and the value of biodiversity should be accounted for in the infrastructure guidelines.
