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Ireland's Climate Action Plan 2021

26 November, 2021

The Climate Action Plan 2021 (CAP 2021), the Government's second action plan since the inaugural plan of 2019, provides a framework for delivering the Government's target of a 51% reduction (relative to 2018) in greenhouse gas (GHG) emissions by 2030. CAP21 follows the Climate Act 2021, which commits Ireland to a legally binding target of net zero greenhouse gas emissions no later than 2050, and a reduction of 51% by 2030. The Climate Act provides a governance framework for annual revisions of the Climate Action Plan and the development of a National Long-Term Climate Action Strategy at least once every ten years. The Government is also committed to reducing emissions by an average 7% per annum by 2030.

Delivering the CAP21's ambition will require a fundamental change in how the economy, businesses and consumers operate and how citizens go about their daily lives. The Action Plan is underpinned by a series of sectoral emissions reduction ambitions and enabling actions.

An landscape photo of wind-powered generators in a misty field at sunset.

Sectoral challenges

While CAP21 does not define individual sectoral targets, it details indicative emissions reductions ranges for each sector of the economy. Some of the ranges are wide - electricity must reduce emissions somewhere between 62% and 81%, a difference of 19%. Others have a narrower range—agriculture must reduce emissions somewhere between 22% and 30%—only an 8% difference.

Emissions reductions by 2030:

  • Electricity: 62-81%
  • Transport: 42-50%
  • Buildings: 44-56%
  • Industry or Enterprise: 29-41%
  • Agriculture: 22-30% reduction
  • Land Use, Land Use Change and Forestry (LULUCF): 37-58%

Sectoral reduction ranges will be translated into sectoral emissions ceilings following the legal adoption of the Government's carbon budgets and sectoral emissions ceilings. These targets will be finalised in Climate Action Plan 2022. In October, the Climate Change Advisory published its proposed economy-wide carbon budgets, which are to be applied across relevant sectors as emissions ceilings by the Minister for the Environment. The first carbon budget will see emissions reduced by 4.8% on average between 2021 and 2025. The second budget, running from 2026 to 2030, will see emissions reduced by 8.3% on average. The first two carbon budgets are designed to align with the Government's 2030 emissions reduction target. Achieving a 51% reduction in GHG will result in a cut of almost 35 million tonnes of CO2.

If sectoral targets and carbon budgets are not achieved CAP21 establishes that corrective or additional measures may be introduced to ensure targets are achieved. However, the provisions of the Climate Act stipulate that at the end of a five-year carbon budget period, any excess emissions will be carried forward to the next budget period, which will be reduced accordingly. Policymakers may also consider how individual sectors could bear any compliance costs for the state arising from failure to reach sectoral targets.

The CAP is underpinned by a large range of core measures relating to the established fundamentals of decarbonisation such as developing renewable generation capacity, electrifying passenger cars, implementing efficient farming practices. However, full implementation of all core measures will be insufficient to reach the 2030 target (31-33Mt), resulting in an abatement gap of 4Mt. The CAP acknowledges that further measures will be required to close the gap (e.g., electricity storage, green hydrogen, Carbon Capture and Storage (CCS), carbon farming model). As many of these measures are more technically challenging, represent larger system changes or are not yet available at scale in Ireland, CAP21 details that future Climate Action Plans will have to refine the potential of such measures and establish relevant targets, costs and pathways.

Decarbonisation pathways

The electricity sector is expected to play a significant role in decarbonising the economy. While CAP21 details a significant sectoral reduction range, it is equally notable for increasing the renewable electricity generation target for 2030 to 80% (compared to 70% as per CAP 2019). Sectoral emissions will be reduced by a more rapid build-out of renewable generation capacity, including zero-carbon system services and increased deployment of offshore wind, solar and micro-generation capacity. By 2030, Ireland's renewable energy mix will be composed of 5 GW from offshore wind, 8 GW from onshore wind and 1.5-2.5 GW from solar PV. To meet the 80% target by 2030 there are some significant obstacles. Total primary energy demand is forecast to increase over this time period driven significantly by data centre build out. As large portions of the Heat and Transport sectors are electrified the portion of total energy met through electricity production will increase significantly meaning 80% of a much larger quantity.

In decarbonising electricity generation, policymakers must also ensure security of energy supply throughout the net zero transition. Further measures including increased electricity storage and the deployment of zero-emissions gas (i.e., biogas, biomethane and hydrogen) will be required to support security of supply and sectoral ambitions. While the development of CCS could remove further emissions from the electricity system by 2030, CAP21 notes that this would be challenging. To support these developments or measures the Government commits to:

  • Investigating methods to incentivise electrolyser production and grid connection of hydrogen from renewable energy to fuel zero-emission, dispatchable generation
  • Explore developing storage capacity to demonstrate long duration and seasonal storage of renewable energy
  • Examining co-location of electrolysis with renewable energy production infrastructure
  • Developing a policy framework and roadmap for the provision of CCS

Agricultural emissions will reduce by 22% to 30%. Prior to CAP21's publication significant attention focused on the role of the national herd and the sector's emissions profile. While the Government has indicated a position to stabilise the national herd, the CAP does not offer insights on how this is to be achieved. In the immediate term, agricultural abatement will be driven by reducing fertiliser use, significantly increasing organic farming and increasing the adoption of GHG-efficient farming practices. Improving herd genetics is expected to deliver both emissions reduction productivity improvements. The CAP will look to the development of a carbon farming model (with the potential for carbon trading and which rewards farmers for emissions reductions and removals) and sectoral diversification opportunities as means to deliver additional sectoral reductionsor accelerate further sustainability transformation in agriculture. Diversification opportunities will review options for alternative income and land use for farmers, including in areas such as forestry and biomethane and renewable energy production.

In the short-term, electrification will be the primary driver for decarbonising emissions within the transport, built environment and industrial or enterprise sectors. For the transport sector this means almost 1 million electric vehicles on the road by 2030 (845,000 passenger cars, 98,500 commercial vehicles, 1,500 electric buses). Biofuels are to be increased in public transport and there will be an expansion of electric bus and rail fleets. The CAP calls for further reductions to be achieved through switching half a million daily journeys to transport modes with lower energy consumption including walking, cycling, active and public transport.

Within the built environment the plan calls for the use of electric heat pumps and other low carbon technology to be promoted in new and existing buildings. The roll out of district heating in cities and implementation of a new National Retrofit Plan to support the retrofitting of 500,000 homes by 2030 will drive further sectoral reductions. The introduction of low-cost loans, blended with SEAI grants, are aimed at making retrofitting affordable. The successful blending of zero-emissions gas within the gas grid could also provide a decarbonised energy source for both the built environment and industry and enterprise sector.

For industry and enterprise, CAP21 calls for a "new obligation" to ensure that a proportion of energy for heat comes from renewable sources. The CAP also aims to enable the electrification of low temperature heating in the food and beverages sector and high temperature heating in the industrial sector. Decreasing embodied carbon in construction materials and deploying CCS could further reduce emissions in the sector. It is anticipated that hard to abate sectors such as cement and lime can only fully decarbonise with CCS. Pre-2030 adoption of CCS is identified as a challenging and high-cost solution as it requires deploying extensive infrastructure in less than 10 years. The CAP commits to undertake a programme of work to assess the potential of picking two sites with the best CCS opportunities with a view to setting a pathway to its deployment. From a holistic sectoral perspective, decarbonisation implementation strategies and Corporate Climate Action Plans are identified as being critical to supporting and enabling emissions reductions within high impact sectors such as Pharmaceuticals, Cement, Construction, Engineering and other manufacturing. Decarbonisation plans can also help companies remain competitive.

Within the land use sector, increasing annual afforestation rates, reduced management intensity and rehabilitation of peatlands, more efficient management of grasslands and increased use of cover crops are identified as critical to reducing LULUCF emissions.

Investment and financing

Delivering CAP21 is estimated to cost €125 billion or €14 billion per annum over nine years, 2021-30. With the electricity, transport and building sectors expected to transition to low carbon operating models earlier than other sectors the majority of investment will be directed towards these sectors with the most significant share of capital flowing into electric vehicle passenger cars, renewables, and building insulation. For example, industry is harder to abate and investment is expected to come in the following decades. Deploying CCS within the industry sector pre-2030 would require an additional €2 billion investment on top of the current €125 billion requirement.

Transport investment, totalling ~€51 billion, will be dominated by electrification of passenger cars (€38 billion) and LGVs or HGVs (€11 billion). €1 billion will be invested in EV charging infrastructure. Electricity system investments total ~€32 - €37 billion. Delivering Ireland's 2030 renewable generation capacity requires investment of ~€21 to €22 billion. A further €9 to €13 billion must be invested in upgrading network and grid infrastructure to enable this renewable electricity to get to where it is needed. Reducing emissions within the built environment requires investment of €35 billion. Insulating residential buildings (€14 billion) and installing heat pumps in homes (€10 billion) requires the bulk of sectoral investment. €9 billion will be invested in Heat pumps and insulation in commercial buildings.

The Action Plan is interesting for its commentary on the distributional impacts of the required investment. The Government note that exchequer expenditure is neither affordable nor adequate to address the scale of the Government's climate ambition. The scale of the decarbonisation challenge will require private sector capital and the financial sector to work alongside government funding and investment. In particular, the private sector will need to develop innovative market solutions to support this. While the CAP identifies private investment working alongside public funding, the Irish Times noted the coalition leaders confirming that most of the CAP's €125 billion cost will be borne by private individuals, households and the private sector and not by the State.

The cross-cutting nature of climate change requires policymakers to use a multi-sectoral policy framework to drive net zero ambition. The CAP highlights that Government policies on expenditure, carbon and environmental taxation, development of a sustainable and climate resilient financial system, spatial planning, and research, development and innovation development will be used to provide an enabling framework for individual, household, community, and company-level climate action.

Business implications or considerations

The Government's Climate Act, the publication of the Government's first carbon budgets and CAP21 send a clear signal that Ireland and its economy is now being firmly placed on a pathway to decouple economic and emissions growth and transition to a net zero society. Cross sectoral decarbonisation will become increasingly embedded in sectoral planning and policy development.

While CAP2021 details a wide range of actions and ambition, the key challenge facing Government, policymakers and business will be the impact of the implementation of these actions. From a business perspective the Government's pronouncement that most of the CAP's €125 billion cost will be borne by private individuals, households and the private sector warrants attention as to how this cost exposure can be minimised. In addition, the Government's development of sectoral emissions ceilings as part of the carbon budget process could have potential operational impacts for companies operating within different sectors.

The Government's decarbonisation and net zero commitments, coupled with increasing climate and sustainability requirements from companies' stakeholders including customers, investors and their own employees, requires companies to recognise and prepare for a new operating environment.

Developing a net zero strategy can support a business' decarbonisation transformation. Achieving net zero will need radical and rapid transformation. To deliver on net zero commitments, companies will need to undertake end-to-end business transformation. This includes understanding the implications of net zero for a company's growth strategy and operating model, and embedding net zero across all business functions (e.g., governance, supply chain, finance, innovation).

Companies can take five actions to build a net zero strategy

  1. Establish your net zero ambition
  2. Conduct a business risks and opportunities assessments
  3. Set climate targets and prepare the organisation for success
  4. Align strategy to net zero
  5. Implement a report framework

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Kim McClenaghan

Partner, PwC Ireland (Republic of)

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