06 Dec 07 Financial Resolution No. 5: General (Resumed).

The issue of climate change is the greatest challenge facing humanity over the coming century. Climate change is a challenge like no other. It is profound in its implications for the planet and its inhabitants. It also cuts to the core of modern living and commerce in the 21st century. The causes are known - human induced emissions of greenhouse gases. The solution is obvious - we must reduce these emissions and quickly enough to avoid the worst impacts of climate change. We all have a personal interest in succeeding in this objective. We all have a responsibility to play our part.

In global terms, Ireland’s emissions may be relatively small but our scope to show leadership is enormous. Over the past 20 years, we have succeeded in becoming one of the world’s most advanced countries, economically and technologically. Now, we need to draw on the resourcefulness, initiative and determination that brought us such success and apply it to the challenge of adapting to a low-carbon society. With our EU colleagues, we have been to the forefront in bringing the Kyoto Protocol into force and we will begin, next week, the task of persuading all the nations of the world to join us in a strong global agreement for the post-Kyoto period. Our efforts to secure global agreement on deep cuts in emissions must be backed up by a sufficient level of ambition at home. The programme for Government makes it clear that we are up for the challenge.

Deputy Simon Coveney: It does not.

Deputy John Gormley: I am pleased today to introduce the first ever Irish carbon budget. The preparation of an annual carbon budget is a central commitment of An Agreed Programme for Government. The Carbon budget marks the beginning of a new era. It is an era in which climate change moves to the heart of Government decision-making. It puts our responsibilities to tackle climate change on an equal footing with our responsibilities to manage the economy.

Deputy Simon Coveney: It does not.

Deputy John Gormley: It recognises that the economy and the environment cannot be separated, and that the greatest risk to the economy is climate change.

This carbon budget will serve a number of purposes. It will integrate climate change considerations into the Government’s budgetary policy, as they must be integrated into the decision-making process across all sectors of Government. It will be a clear measure of the progress made each year towards meeting our targets for emission reductions. It will help in our efforts to increase public understanding of climate change and the Government’s response.

The concept of the carbon budget is new and this year’s format can be seen as a pilot. I will consider how its content and format can be developed and improved in future years. The carbon budget process as it develops will be essential to achieving our greenhouse gas emissions goals. Climate change is a core consideration in Government policy-making. Therefore, it must be integrated into the annual budget process. We must reach a situation where our estimates of the carbon impact of the budget are as good as our estimates of the financial and economic impacts of the budget.

From now on, we must think differently - we must think carbon. Carbon must become the new global currency if we are to successfully tackle climate change and we must then de-carbonise society. We must put a price on carbon. I hope all Deputies in the House will begin to understand the necessity of introducing a carbon levy.

My statement today is accompanied by a short table, which has been circulated to Deputies, and which is the essence of the carbon budget. It presents an historical picture of Ireland’s emissions trends to date and is forward-looking in that it shows how Ireland’s emissions are expected to develop over the next five years. The table includes Ireland’s emissions in 1990 and 2005, as well as provisional estimates from the EPA and SEI for 2006. These figures show some revisions for the years 1990 and 2005 compared to those published early this year due to ongoing improvements in the reporting systems. The provisional estimates are that total emissions in 2006 were just under 1% lower than in 2005, a welcome reduction following the previous year’s increase.

Deputies should refer to the table and I will explain what it contains. The three key columns are identified as D, E and F. Column D shows projected emissions for the 2008-12 Kyoto Protocol period, taking account of measures included in the national climate change strategy published last April. Column E shows the effects of the additional measures we have put in place, including those in the budget. Column F updates projected emissions to take account of these measures. Column D shows that the combined effect of all measures quantified in the national climate change strategy was projected to reduce our net emissions to 66.2 million tonnes as a yearly average in the 2008-12 period. That is 3.2 million tonnes above our Kyoto Protocol target and would, therefore, have required the State to buy an average of 3.2 million carbon credits each year under the flexible mechanisms of the protocol, at an annual cost of anywhere between €30 million and €60 million, or possibly even more, depending on the terms which the NTMA is able to secure for its investments in relevant funds and projects.

That projection in the national climate change strategy of 66.2 million tonnes in the 2008-12 period is about 2.2 million tonnes above what is required to meet the programme for Government target of an average annual reduction of 3% in emissions. Deputies can see, from columns E and F, the effects of the further steps we are taking to deliver more reductions in emissions. These steps will get us closer to the 3% target and also reduce the amount we have to spend on carbon credits to comply with our Kyoto Protocol commitment.

I recognise, as Al Gore did when he was in Dublin last weekend, that the flexible mechanisms are an integral part of the Kyoto Protocol agreement and an important instrument in promoting low emissions investment in developing countries. Notwithstanding this, the Government is committed to ensuring Ireland is able to fulfil its commitments as much as possible by emission reductions through domestic action, reflecting our status as a developed nation with the resources, knowledge and political commitment to do so. If we can achieve the 3% annual reduction on average between now and 2012, we will need to purchase only 1 million carbon credits on average each year. Such a reduction is a big challenge but we are determined to meet it and the budget is a significant first step.

I will now provide a summary of new measures. The carbon budget table shows a preliminary indicative additional saving of 600,000 tonnes from measures announced since the publication of the national climate change strategy. These savings will be achieved due to additional savings by the emissions trading sector following the Commission’s decision on Ireland’s national allocation plan in July this year; additional measures included in the draft energy efficiency action plan, published by my colleague, the Minister for Communications, Energy and Natural Resources - these include the announcement yesterday by the Minister for Finance of funding for an initial pilot programme to encourage the owners of older housing stock to upgrade the energy performance of their homes; and additional funding for a further phase of the highly successful greener homes scheme. The new phase of the scheme which was launched in October will promote a new range of additional renewable technologies now ready for market and deliver almost double the emissions savings that will be achieved under the scheme.

The overall effect of all these additional measures is to deliver a total annual saving of 600,000 tonnes on average each year in the 2008-12 period, bringing projected annual net emissions down to 65.6 million tonnes. This has two important consequences. First, it reduces our reliance on purchasing credits by 600,000 tonnes per year which, in turn, means a significant saving to the Exchequer. Second, it brings us closer to meeting the 3% target for annual average domestic reductions. The gap to be bridged is reduced from 2.2 million tonnes to 1.6 million tonnes.

As well as these measures which are calculated to deliver additional emissions savings, I am taking steps to implement measures which will deliver savings already quantified in the climate change strategy, as follows. I am announcing major changes to the existing motor tax regime to accompany the VRT changes announced yesterday by the Minister for Finance. Under the new system, both taxation regimes will be based completely on the rated CO2 emissions from the vehicle in question. These changes will be accompanied by a new mandatory labelling system for cars based on emission levels which will be similar to the energy rating label in place for white goods. I will give details of the motor taxation changes later in this address. I will sign regulations by the end of this month to strengthen significantly the energy efficiency requirements for new homes to deliver energy and emissions savings of 40% on current standards. I will further strengthen building standards in 2010 to achieve a 60% improvement on current levels. It is my ambition eventually to achieve zero carbon emissions associated with new dwellings. I hope to do this by 2016.

As I said, this is a first step. Efforts to reduce Ireland’s greenhouse gas emissions will be an ongoing and central feature of the work of the Government across every sector. For example, it is clear from the table that the transport sector has a critical role to play. Last year greenhouse gas emissions from transport increased by over 5%, indicating the scale of the challenge in the sector. Next year will see the publication of the sustainable travel and transport action plan which will provide the basis for radical change in that sector.

All my ministerial colleagues on the Cabinet committee on climate change and energy security are looking closely at what more can be done in the sectors for which they are responsible. To take just one example, from my own area, of the scope for further action, I am announcing today that I will develop a national energy efficiency standard for lightbulbs.

Deputy Phil Hogan: Will the Minister change the bulbs again?

Deputy John Gormley: While the national climate change strategy proposed a levy on low efficiency bulbs, a more direct approach is necessary. The standard I will introduce will see an end to incandescent bulbs and will have to be met by all lightbulbs on the Irish market from January 2009. A national standard will create certainty for manufacturers and suppliers about the lamps that can be supplied and will stimulate the development of alternative lighting technologies in Ireland. It will also provide the greatest assurance as to effectiveness of the desired environmental outcome, both in terms of reduced greenhouse gas emissions and reduced energy consumption. This measure will deliver emissions savings of up to 700,000 tonnes per year from residential lighting alone when incandescent bulbs are fully replaced in all domestic light fittings. It could also save consumers an estimated €185 million in electricity costs per annum.

Next week I will join the world’s environment Ministers as we begin the process that must lead to an international agreement on reducing emissions in the post-Kyoto Protocol period. Europe is showing real leadership on what is required and we must be part of it. The need to look to 2020 and beyond and contemplate the scale of the required emission reductions clearly shows that the annual carbon budgeting process must be an integral feature of the Government’s policy-making and annual budgetary process. I will be providing more detail on the information contained in the carbon budget when I present the first annual status report on the implementation of the national climate change strategy to the Oireachtas in the spring.

I wish to deal with motor tax measures. Following a review earlier this year of its strategy to reduce carbon dioxide or CO2 emissions from new cars, the European Commission concluded that only limited progress had been made. In the light of this review, the Commission announced the framework of a new strategy that sets out an integrated approach towards achieving this overall objective. The new approach proposed a combination of legislative measures encouraging member states to levy car taxes based on CO2 emissions; promoting improvements in vehicle technology through enhanced research efforts, and promoting the purchase of fuel efficient vehicles.

Road transport generates about one fifth of the European Union’s CO2 emissions, with passenger cars responsible for around 12%. Although recent years have seen improvements in vehicle technology - particularly in fuel efficiency which translates into lower CO2 emissions - this has not been enough to stem the growth in emissions due mainly to increased car ownership and increased size. While the European Union reduced overall emissions of greenhouse gases by almost 5% between 1990 and 2004, CO2 emissions from road transport rose by 26%. This was despite a reduction of over 12% in average new-car CO2 emissions between 1995 and 2004.

The situation in Ireland is even more stark. While road transport accounts for a similar portion of total emissions, we have seen an increase in emissions from road transport of around 180% between 1990 and 2006. This reflects growth from relatively low car ownership levels in 1990 but unfortunately the growth is expected to continue.

Currently, 12 EU member states, including Austria, Belgium, Cyprus, Denmark, France, Germany, Italy, Luxembourg, The Netherlands and the United Kingdom, levy or propose to levy car taxes that are totally or partially based on a car’s CO2 emissions or fuel consumption, or both.

In tandem with the Tánaiste’s announcement yesterday on vehicle registration tax, I am introducing a fundamental change in the manner in which motor tax is to be charged for all new cars and newly imported cars. It will come into effect on 1 July 2008, from which date motor tax on such cars will be determined solely on the basis of their CO2 emissions. Thus, motor tax will be re-balanced in favour of cars with lower emissions. The public consultation undertaken on the greening of motor taxation following last year’s budget proposed a system based on a combination of CO2 emissions and engine size. If we are serious about addressing emissions from cars, we need to move to a system based solely on CO2 emission levels. I am very pleased we are introducing this today. It reflects the views of many contributors to the public consultation exercise.

Turning to the detail of the new motor tax system, there will be a number of CO2 bands, commonly referred to as the seven white labels ranging from A to G. These are the same bands announced by the Tánaiste yesterday in respect of vehicle registration tax, and thus there will be a common approach in the motor tax and vehicle registration tax systems. Motor tax rates will be graduated as one moves up the CO2 bands. Band A corresponds to CO2 emissions of under 120g/km - the motor tax rate will be €100. Band B corresponds to CO2 emissions of between 121g/km and 140g/km - the rate will be €150. Band C corresponds to CO2 emissions of between 141g/km and 155g/km - the rate will be €290. Band D corresponds to CO2 emissions of between 156g/km and 170g/km - the rate will be €430. Band E corresponds to CO2 emissions of between 171g/km and 190g/km - the rate will be €600. Band F corresponds to CO2 emissions of between 191g/km and 225g/km - the rate will be €1,000. Band G will be the top band and the rate will be €2,000, reflecting CO2 emissions of over 225g/km.

Deputy Simon Coveney: The Minister’s car.

Deputy John Gormley: Mine is not in the top band because it is a hybrid.

The clear objective of this new motor tax system is to influence the purchasing decisions of consumers by rewarding the buyers of low-emission cars and charging a premium on less-efficient vehicles. From 1 July, anyone buying a new car or importing a car can make a choice for the environment by purchasing a low CO2 emitting car, and thus enjoy a lower rate of motor tax. Alternatively, if the choice is to purchase a high CO2 emission car, a higher rate of motor tax will apply.

A key part of both the motor tax and vehicle registration tax initiatives will be a new mandatory labelling system for cars based on CO2 emission levels. This will be accompanied by an active public information campaign to promote the purchase of fuel-efficient cars. The proposed improvements in vehicle labelling are a very positive step in enabling Irish motorists to make more informed choices in buying new vehicles. I look forward to support from the motor industry in making their introduction a success.

The fundamental changes I am announcing for the motor tax regime for new cars are designed to achieve financial neutrality in terms of income to the local government fund.

Deputy Phil Hogan: Will the haulage industry be included?

Deputy John Gormley: I will talk to the Deputy afterwards.

Deputy Phil Hogan: I am sorry for upsetting the Minister.

Deputy John Gormley: That is not a problem.

As we proceed, there will be a need to keep the new arrangements under review to ensure the environmental objective is delivered while funding for local authorities is sustained.

These new measures apply to new cars and newly imported cars only with effect from 1 July 2008. Cars registered before that date will continue to be taxed in future years under the existing system relating to cubic capacity engine sizes.

The Environmental Protection Agency is charged with protecting our environment and does so in different ways. It licenses environmentally high-risk activities through the integrated pollution prevention and control system and through waste licensing. It enforces the licenses that it grants, both to private and public sector undertakings, to ensure compliance with the conditions it attaches thereto. It also operates an emissions trading unit that is vital to our progress in meeting our Kyoto Protocol obligations. More generally, the agency monitors the state of our environment, highlighting the environmental pressures and challenges that we face.

The increase of over 40% in the Exchequer provision for the agency will enable it to carry forward this work with added impetus and vigour. It is further clear evidence of the impact of the Green Party in Government, and of the Government’s commitment to respect and protect our environmental heritage in the broadest sense.

The revised expenditure provisions announced by the Tánaiste regarding my Department’s Estimates make provision for increased levels of spending in many important areas. We will maintain strong momentum in the major national development plan housing and water services programmes. I am placing stronger emphasis on heritage areas in my Department and I will strengthen our capacity to further compliance and enforcement of our legal obligations in the area of environmental protection.

My Department’s National Parks and Wildlife Service, NPWS, is responsible for nature protection. NPWS has a nationwide presence and is key to front-line enforcement of our protected habitats and species. NPWS also provides expert advice to farmers and other landowners as well as to local planning authorities in circumstances where development impinges on sensitive sites and species.

The Government is committing resources to enhancing our national parks and reserves. In 2008 I will be seeking to consolidate and strengthen the Department’s NPWS presence in the countryside. I also intend to review the natural heritage regulations in the new year to ensure that Ireland plays a leading role in nature conservation.

Ireland has a rich archaeological and architectural heritage. It is our duty to continue to protect it and hand it on to future generations to enjoy. The programme for Government sets out a number of important objectives on the protection of our built heritage. Significant progress has already been made in the achievement of those objectives and the most recent budget continues that work.

The programme for Government commits to strengthening the role and operation of the Heritage Council, particularly regarding built heritage. We are very clearly giving effect to that commitment today by providing €13.4 million to the Heritage Council, an increase of 14% over the figure for 2007. This will allow the council to further increase awareness and the growing appreciation of heritage nationally, carry out heritage research surveys and analysis, and promote best practice in conservation and sustainable heritage management.

The significant investment in infrastructure and other development in recent years has, of necessity, been complemented by a strong expansion in the archaeological investigations essential to ensure we achieve the right balance between development and the protection of the non-renewable resource that is our archaeological heritage. I am very pleased, therefore, to announce I will be providing funding in 2008 for a dedicated archaeological research fund, which fund will come into operation next year. While details remain to be worked out, this new measure is likely to be administered by the Heritage Council, which already manages a number of built and natural heritage grants programmes successfully on behalf of the Department. My Department will continue to have broad oversight of the new measure and its administration.

I have no doubt there is widespread support for maximising archaeological knowledge as we progress our development projects, and for the dissemination of the information gained to the widest extent possible. The new archaeological research fund provides a mechanism to make this goal a reality.

Housing matters will be dealt with more fully by my colleague, the Minister of State with special responsibility for housing, urban renewal and developing areas, Deputy Batt O’Keeffe. The principle of sustainability is also a key concern of housing policy. While acknowledging the important economic aspects of the housing sector, housing policy is about providing homes for people. The aim must be to provide homes in a good quality environment with all that this means from a community and infrastructure perspective. Sustainable housing involves the construction of homes that are structurally sound, energy efficient, environmentally friendly and adaptable over time to changing household needs.

My Department places a particular focus on interventions necessary for those who cannot meet their accommodation needs solely from their own resources. I welcome the record financial provision of more than €1.7 billion for social and affordable housing in 2008. The increased level of funding is in line with the housing commitments contained in Towards 2016 and demonstrates the Government’s determination to fully honour these obligations.

The 2008 provision will allow for 6,600 local authority homes to be started or acquired, 2,000 starts by the voluntary and co-operative housing sector and continuing implementation of the rental accommodation scheme, with a total programme output of starts or acquisitions of 9,000 homes. Funding will also be maintained for the provision of Traveller and homeless accommodation and work will continue on the redevelopment of Ballymun.

In addition, I am particularly pleased to have been successful in securing funding of €10 million to kick-start the major regeneration programme in Limerick. As well as dealing with a serious legacy from past mistakes, the regeneration programme in Limerick is an exciting opportunity to showcase the quality and sustainability agenda, which is now at the heart of our approach to housing.

Improving the quality of social housing generally is a key focus for us now. New projects will be sustainable community proofed as part of the project appraisal stage. Greater innovation will be encouraged, building on those initiatives taken already by many local authorities in building sustainable housing.

I am determined to ensure that the substantial financial provisions secured for 2008 will be used wisely. By building on the momentum achieved to date, we will be well placed to meet, in scale and substance, the ambitious targets set for the initial 2007 to 2009 phase of Towards 2016 and the national development plan.

It is very clear that the environmental imperatives of sustainability and balanced regional development now take centre stage in the national development plan. Consistency with the national spatial strategy and the regional planning guidelines will be a requirement for all infrastructure investments. The systematic threading of the national spatial strategy into the national development plan in this way will yield important demographic, social and environmental dividends in the future. Equally, the factoring in of environmental impacts in a systematic manner is a real change in the way public expenditure programmes are implemented, which I very much welcome. It reflects a widespread consensus that now obtains regarding policies to promote economic growth and the protection of the environment.

I am happy to have had the opportunity of making a comprehensive statement to the House setting out budgetary implications in respect of matters for which I am responsible as Minister for the Environment, Heritage and Local Government. I am particularly pleased to be in a position to announce the carbon budget. My colleague, the Minister of State with responsibility for housing, will address housing matters and, together with the other Ministers of State in the Department, we look forward to a very successful implementation of Government policies and strategies in 2008.

I reiterate that my party is in Government to effect significant changes for the good of the environment and for the continued prosperity of the country. We are making good progress and this budget is a significant step for us in the right direction. For the first time, we have put forward a carbon budget. I will be on my way to Bali on Saturday and it is important we set the tone here for the successful conclusion of negotiations there. Hopefully, we will have a road map to a better future.