The Fiscal Advisory Council has recommended to the Irish Government that the new climate change targets need clear costings.

The council, which was established in 2011 in the aftermath of the financial crisis, is an independent agency whose purpose is to advise the Government on budgetary planning.

Its latest report focuses on the recovery from COVID-19, but has a section dedicated to the implications of climate change legislation for the Irish economy.

With agriculture accounting for 37% of Irish emissions in 2020, it follows that the agricultural sector will be in the firing line.

The council doesn’t dispute the need for the reduction targets, but highlights that they will “require a fundamental reorientation of how the economy operates, incurring heavy claims on Government resources.”

It suggests the cost could be substantial with a sudden impact, given that the adjustments to meet 2030 targets will be frontloaded with the 7% overall reduction by 2030, double the target in the 2019 Climate Action Plan.

Absence of cost details

The council notes how the Government has provided little detail on the cost of reaching these revised targets, or how they will go about it, though a new National Development Plan will be revealed later this year. It also points out that the ambitious targets come at a time when there are already substantial demands on the public finances. Sláintecare, and COVID-19 recovery measures will be a huge drain on resources, while an aging population will mean higher healthcare and pension costs and reduced economic growth. The council also highlights that the Programme for Government rules out increases for large areas of taxation, putting pressure on the revenue side.

All this means for the Fiscal Advisory Council is that the implications of the new climate policy is unclear. It accepts that carbon taxes will generate revenue in the short-term. However, its purpose is to discourage particular behaviours and by succeeding in doing so, revenues from carbon taxes will decline as a result. The report concludes by recognising that “climate change mitigation is of paramount concern” but the Government “must outline the costs associated with the revised emissions targets and the way funding will be generated to meet these demands.”

Comment

The Fiscal Advisory Council is by no means an advocate for the welfare of Irish farmers, but it does take a clinical view on the issues that will impact on the finances of the Irish State. The only reference to agriculture specifically in this section of the report is to show the proportion of Irish emissions it accounts for in a pie chart.

However, the analysis that meeting the demanding reduction targets will come at a considerable costs gives the clue that a substantial proportion will be borne by farmers. It is timely that the council reminds the Government of what might appear obvious – when policy decisions are going to cost a major amount of money, it would be appropriate to have professional costings carried out to quantify these and then think about how they might be paid for.