Brian Keegan: Climate plan comes with a heavy cost

Sun, 07 Nov, 2021 - 15:30

This weekend, the headlines about the Government’s climate action plan screamed at the total cost estimated at €125bn.

That is a big sum of money, amounting to about twice the total tax collected in a year. Admittedly, the cost is to be spread out over a decade, but finance at that scale is a very big ask for a country with a high debt burden, and still dealing with annual government overspending as a consequence of the pandemic.

Officialdom is fond of pointing out that the national debt per capita is €50,000. We are now being told that the national cost per capita of achieving our climate targets is €25,000 for every man, woman and child in the population.

The commentary in the climate action plan about taxation is somewhat muted given the scale of these numbers. It notes that the carbon tax receipts, to which we are already committed, will bring in about €9.5bn over the life of the plan.

The plan also commits to 'examinations' and 'reviews' of things like the tax regime for vans, the phasing out of Vat rebates for commercial fossil fuels, levelling out the difference in diesel and petrol costs, changing the taxable benefit-in-kind rules for cars and continuing the tax writeoffs for energy-efficient equipment.

Anything even vaguely resembling tax relief for property development is usually taboo in a government document, yet there will be an assessment of the role of taxation measures in meeting building retrofit targets.

The language around these proposals is non-committal, but that is because the Department of Finance jealously guards its control over all aspects of the tax system.

Other departments and agencies may propose, but only the Department of Finance can commit to tax changes.

Even if all these tax initiatives saw the light of day, they still would not approach the €125bn price tag. There will be more costs for individuals and businesses on top of the carbon taxation collected by Revenue. Even without official climate-action plans it will become more expensive to conduct business using processes, practices and materials which contribute to climate change.

Momentum is now gathering in many developed countries, including Ireland, towards preferential financing arrangements for green industry and businesses with bona fide decarbonisation credentials.

Irish businesses of any size in the coming years will have to report coherently on their sustainability initiatives. Green reports will become as commonplace in a company’s set of accounts as the balance sheet currently is.

This is a fundamental change in the approach to commercial accountability, but barely touched on in the Climate Action plan. Financial reporting standards are already migrating towards this new normal, and there are EU proposals to extend the existing responsibility of larger businesses to provide details of their impact on the environment.

The carbon footprint of an individual is small when compared to the carbon footprints created through industrial activity. If profits suffer because business fails to manage its environmental impact, that will prompt reductions in overall carbon output faster and more efficiently than any government action plan.

It is an idea which is curiously missing from the pages and pages of climate actions published by the Government last week.