6. ENERGY AND CLIMATE

To align energy and climate policy measures and planning towards 2030, the government is developing a National Energy & Climate Plan (NECP) for the period 2021-30. The draft NECP was submitted to the European Commission in December 2018, in line with the EU Governance of the Energy Union and Climate Action Regulation. The final version of the NECP has to be submitted 1 year later, together with a long-term strategy. The long-term strategy for GHG emissions reductions must have a perspective of at least 30 years.

The NECP will replace the existing plans and reporting structures such as the National Renewable Action Plan, the National Energy Efficiency Action Plan and the Climate Monitoring Mechanisms Regulation. It will include trajectories for national emissions, renewable energy and energy efficiency, and measures required to achieve these trajectories.

Taxation policy

Ireland is one of a few countries globally where all fossil fuels are subject to a carbon tax. Electricity generation and large, energy-intensive industry have been included in the EU ETS since 2005. A carbon tax for the non-ETS sectors was first introduced in 2009 for petrol and automotive diesel. It was extended to all mineral oils and natural gas on 1 May 2010, with solid fuels included in 2013, at a lower rate of EUR 10. The tax now applies to all non-ETS fuel combustion except for certain small exemptions (e.g. high-efficiency co-generation of heat and power).

Originally levied at EUR 15 per tonne of CO2 emitted, the tax was increased to EUR 20 for natural gas and mineral oils in 2012 and for all fuels to EUR 20 in 2014. There has been no increase since. The tax is considered successful, but its impact has levelled off as it is has not been increased since 2014. The government calculates that the tax abates 325 kilotonnes of CO2 equivalent annually at its current level.

Carbon pricing is a key element of the government’s climate policy as it has substantial potential to drive energy efficiency improvements. A key action in the NMP is to examine the mitigation, distributive and economic impact of the carbon tax and to assess possible future tax rates. The Department of Finance undertook this review in 2018. A possible increase of the CO2 tax was considered as part of the 2018 budgetary process but not implemented on this occasion. No carbon tax increase has been proposed by the government for 2019. However, the 2019 budget included a commitment to put in place a long-term trajectory for carbon tax increases to 2030. Work for this trajectory will be undertaken in 2019. Over EUR 3 billion has been collected in revenues from the CO2 tax since its introduction in 2010. If the carbon tax were increased by EUR 5 per tonne of CO2, it could yield an additional EUR 100 million per year and would add less than 2% to the price of diesel and petrol.

Revenues from the CO2 tax revenues are not pledged for a specific purpose, but accrue to the central treasury. They are therefore not necessarily reinvested in climate mitigation measures.

Transport sector emissions

The transport sector is the second-largest emitter of energy-related CO2 emissions in Ireland, with nearly a third of total emissions, just below those from the power sector.

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Transport emissions can be reduced through fuel switching to biofuels or electricity, modal shifting (e.g. towards more public transportation) and improving the fuel economy of the vehicle fleet.

Energy consumption and emissions

Transport energy demand fell rapidly in the years after the economic crisis, but has picked up in recent years. The transport sector consumed 4.0 million tonnes of oil equivalent (Mtoe) in 2016, a 14% increase from 2012 but a 17% decline compared to the peak year of 2007 (Figure 6.7).

Figure 6.7 Total final consumption in transport by source, 1973-2016

Mtoe

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Energy demand in transport increased by 14% in the period 2012-16, after a rapid decline in the previous 5 years.

* Negligible.

Source: IEA (2018b), World Energy Balances 2018, www.iea.org/statistics/.

Oil accounts for 97% of transport energy demand. The remaining 3% is mainly from biofuels, and electricity accounts for only 0.1% of transport energy consumption. Diesel accounts for 72% of total transport fuels and gasoline for 25%. Road transport accounted for 97% of the total transport energy consumption in 2016. Rail energy consumption decreased by 9% between 2006 and 2016, and accounted for only 1% of energy consumption (Figure 6.8).

The contribution of the transport sector towards meeting Ireland’s emissions and renewable targets for 2020 lags behind the target. Transport emissions peaked at 14.5 MtCO2-eq in 2007, and then fell for five consecutive years in line with the contraction of overall economic activity to 10.5 MtCO2-eq in 2012. Transport emissions have been increasing again since 2013, and their level in 2016 (11.9 MtCO2-eq) was the same as in 2004 (Figure 6.9). This is due to the economic recovery and the subsequent increase in demand for transport services.

The strong increase in emissions from the transport sector reflects the strong proliferation in car ownership. This has gone from around 800 000 cars in 1990 to over 2 million in 2017, an increase of more than 150% (DCCAE, 2017a). Car use is also showing an upward trend, with the total annual vehicle kilometres for private cars increasing by 9.4% between 2011 and 2015 and by 3.5% from 2015 to 2016. Private

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Expanding the use of alternative fuels and technologies

Ireland has a binding target to reach 10% renewable fuel in the transport sector by 2020. In 2016, 2.9% of total fuels were renewables. The EPA projects that Ireland will reach a share of 9.2% by 2020 in its “with additional measures” scenario (EPA, 2018a). The Biofuels Obligation Scheme of 2010 is Ireland’s primary policy measure to increase the share of renewable energy in the transport sector. From an initial rate of 4%, the level of obligation has increased to 8% of motor fuels, typically diesel and petrol, placed on the Irish market to be produced from renewable sources. The rate increased to 10% on 1 January 2019. The government plans a further increase to 11% on 1 January 2020 and to continue the programme to 2030 in alignment with policy developments in the European Union. The biofuel obligation achieved savings of about 0.4 MtCO2-eq in 2015 (DCCAE, 2017a). The NMP estimates that the biofuel obligation will achieve savings of 2.1 MtCO2-eq between 2017 and 2020 and 9.8 MtCO2-eq between 2017 and 2030 if the proposed rate increases are implemented (DCCAE, 2017a).

The government also plans to hold public consultations on the future development of the biofuel obligation. This could include an increase to at least 12% in 2022, and upward adjustments in the buy-out rate for industry and the introduction of an advanced biofuels obligation. The potential inclusion of the heat sector in the programme will also be considered, based on the level of use and the availability of suitable biofuels (Government of Ireland, 2018).

Ireland published its National Policy Framework on Alternative Fuels Infrastructure for Transport in May 2017. This focused on measures to support the uptake of low-emission vehicles and specifically on infrastructure requirements for electric and natural gas vehicles. The framework also set a target for all new passenger cars and vans to have zero emissions as of 2030.

Ireland is committed to sharply increasing the share of electric vehicles (EVs) in the passenger and light commercial vehicle stock by 2020. It has implemented several support measures, but the uptake of EVs remains below expectations. By October 2018, about 6 500 EVs were deployed in Ireland against the original target set in 2009 of about 200 000 EVs by 2020. The government has consequently adjusted the target downward to 20 000 by 2020.

There are multiple reasons for the low uptake of EVs. These include the high cost and limited choice of vehicle models, low consumer acceptance and awareness, and lack of an easily accessible charging infrastructure. The government set out how to scale up the ongoing support measures to overcome the identified barriers in the 2017 framework. EV deployment is expected to accelerate beyond 2025 based on these new measures, with 400 000 EVs on the roads by 2030.

The Electricity Supply Board (ESB), the state-owned electricity company, is responsible for nationwide installation of EV charging points. The Commission for Regulation of Utilities has allowed the ESB to invest up to a maximum of EUR 25 million in the charging infrastructure and to recover these costs from the distribution network charges.

Approximately 900 public charging points, including 79 fast chargers, had been installed by the end of 2017. Most towns with a population above 1 500 had at least one charging point. The government aims to have 1 500 public charging points installed by 2020.

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By the end of 2017, the ESB had also installed over 2 000 private domestic charging points as part of an incentive programme to provide free charging points to qualifying EV purchasers by 2020. This support ceased at the end of 2017 and was replaced by a new grant of EUR 600 to support the installation of home chargers. This has been available to buyers of new and second-hand EVs since the start of 2018.

Grants of up to EUR 5 000 have been made available since 2011 to incentivise consumers to purchase a battery-electric vehicle (BEV) or a plug-in hybrid electric vehicle (PHEV). At the end of 2018, 3 649 EVs had benefited from the grant for a total disbursement of EUR 172 million. BEVs and PHEVs also qualify for vehicle registration tax (VRT) relief of between EUR 2 500 and EUR 5 000. This provides for a maximum combined subsidy of up to EUR 10 000 in the case of a BEV and up to EUR 7 500 for a PHEV. BEVs will continue to benefit from VRT relief until the end of 2021 and PHEVs until the end of 2019, while the grant programme will continue. To incentivise the purchase of EVs, the government introduced a reduction of tolls for EVs from 1 July 2018 for the period until 31 December 2022 (Transport Infrastructure Ireland, 2018).

The government has launched several programmes to support EV uptake and deployment in the commercial sector. It introduced an accelerated capital allowance for energy-efficient equipment purchases by companies paying corporation tax. The tax is applicable to the purchase of BEVs, PHEVs, other hybrid vehicles and associated charging equipment. Moreover, taxi and small public service vehicle operators have been eligible for an EV purchase grant of up to EUR 7 000 per car since February 2018.

Electrification is not considered suitable for the freight sector. The government is therefore exploring alternative fuel types such as biogas, biofuels, hydrogen, compressed natural gas (CNG) and liquefied natural gas. The 2019 budget introduced a new accelerated capital allowance programme for gas-fired commercial vehicles and refuelling equipment to encourage their uptake as an economic and environment-friendly alternative to diesel.

The excise rate for natural gas and biogas used in transport has been set at the EU minimum rate of EUR 2.60 per gigajoule since 2015. It will be held at this level until the end of 2022. The government hopes that this will make natural gas and CNG more competitive in relation to diesel, the dominant transport fuel in the freight sector.

Gas Networks Ireland (GNI) is undertaking a study of the impact of installing 14 CNG refuelling stations and setting up a large-scale renewable gas injection point on the gas network in Ireland. The European Commission has provided funding support for the study. Construction of the stations will be completed in 2019, and the impact study will be completed in 2020. Provision of the biogas injection facility will enable indigenous renewable gas to become part of Ireland’s future transport fuel mix. The GNI set up a Natural Gas Vehicle Fund as part of the study, with a capital of EUR 700 000 to support the deployment of dedicated CNG vehicles (DCCAE, 2017b).

The Department of Transport, Tourism and Sport established a Green Public Transport Fund in 2017 to support the uptake of low-carbon, energy-efficient technologies within the public transport sector. This was primarily for buses, to achieve the public sector energy efficiency target of 33% savings by 2020. The fund will also support measures to encourage transition of the national taxi fleet towards alternative technologies. For 2018, EUR 4 million was made available to support switching to alternative fuels (DCCAE, 2017b).

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