Sunday 22 April 2018

We need a level playing field for emissions targets

Ireland is unusual among developed countries in that agriculture is by far the biggest single contributor to our greenhouse gas emissions, 19.6m tonnes or 32pc of the total in 2016.
Ireland is unusual among developed countries in that agriculture is by far the biggest single contributor to our greenhouse gas emissions, 19.6m tonnes or 32pc of the total in 2016.
Dan White

Dan White

Ireland has cut its greenhouse gas emissions by 12pc since 2005 and has by far the least energy-intensive economy in Europe, but still faces the prospect of enormous EU fines for not cutting its emissions even further.

Last Tuesday the Environmental Protection Agency published figures showing that Ireland's greenhouse gas emissions increased by 3.5pc to 61.2 million tonnes of carbon dioxide equivalent in 2016.

"Achieving Ireland's long-term decarbonisation objective can only take place with a transformation of our energy, agriculture and transport systems," said EPA director Eimear Cotter. "We need to adopt a much greater sense of urgency about reducing our dependence on fossil fuels while radically improving energy efficiency."

Ireland is unusual among developed countries in that agriculture is by far the biggest single contributor to our greenhouse gas emissions, 19.6m tonnes or 32pc of the total in 2016. The abolition of milk quotas in March 2015 has been the key driver of higher agricultural greenhouse gas emissions with a 2.7pc increase being a recorded in 2016 and a cumulative 10pc increase since 2011.

But what about our healthy, environmentally-friendly grass-fed cows? Suffice to say that, with the number of dairy cattle having increased by 300,000 over the past four years, all of those extra bovines breaking wind is not reckoned to be good for the planet.

The latest EPA figures show that there isn't the faintest chance of Ireland achieving its target of cutting its emissions by 20pc from their 2005 levels by 2020. The cost of this failure in either EU fines or Ireland purchasing carbon credits to offset the higher-than-mandated emissions has been estimated at between €450m and €610m a year. Just for good measure, Ireland has now signed up to an ever tighter set of emissions targets pledging to cut them by 30pc from 2005 levels by 2030. Based on current trends, this could push the cost of our excess emissions to well over €1bn a year.

At first glance Ireland's appears to be one of the worst performers in Europe when it comes to cutting greenhouse gasses with our 12pc reduction on 2005 levels well behind the EU average of 17pc. So shouldn't Ireland be forced to pay the price for failing to play our part in reducing greenhouse gas emissions?

Look again. Before we don sackcloth and ashes and scourge ourselves for the good of the global environment it might be a good idea to re-examine the emissions data more closely.

It's relatively easy for a country to make serious inroads into its emissions if it has lots of energy-intensive heavy industry to shut down. This appears to be the main factor behind the 26pc fall in UK emissions since 2005.

However, with very little legacy heavy industry, the EU's across-the-board 20pc and 30pc emissions reduction targets discriminate against countries like Ireland.

According to figures compiled by the EU's statistics agency Eurostat, the Irish economy has by far the lowest level of energy-intensity (basically the amount of energy consumed for every unit of economic output) of any European economy.

The energy-intensity of the Irish economy is just half of the EU average.

We also have much lower levels of energy-intensity than the UK, less than two-thirds, despite the recent rapid reduction in its emissions levels.

While the level of energy-intensity is not synonymous with emissions - nuclear power produces no emissions - the two are closely correlated.

What this demonstrates is that, for a low energy-intensity economy such as Ireland's, blanket emissions reductions targets are completely inappropriate. Expecting this country to match the emissions reduction performance of countries such as the UK is absurd.

A reduction in average EU energy-intensity to Irish levels would result in a huge reduction in emissions, far more than either the 20pc by 2020 or even the 30pc by 2030 targets.

The EPA would be far better employed alerting Irish and European policymakers to this fact rather than in publicising what are technically accurate but utterly misleading Irish emissions figures.

Bitcoin - the future of money or ball of smoke?

Last week the price of Bitcoin smashed through the $10,000 barrier, up more than tenfold so far this year. Is the digital currency the shape of things to come or a ball of smoke whose fall will be even quicker than its rise?

Anyone who spent $10,000 buying Bitcoin 12 months ago would now be sitting on an investment worth $132,000. One result of Bitcoin's spectacular rise has been that mainstream investors, who up to now had shunned Bitcoin, are now piling in with Nasdaq announcing plans for a Bitcoin futures market.

So who or what is Bitcoin and is it worth $10,000? Bitcoin, which made its debut in January 2009, is a digital currency. Unlike conventional currencies, there is no nation state or central bank standing behind or regulating Bitcoin. Instead the total number of Bitcoin is capped at 21 million.

That's the theory anyway but how can we be sure that the Bitcoin founders, who still remain anonymous after almost a decade, haven't salted some more Bitcoin for their own purposes? Every central bank in history has eventually succumbed to the temptation of printing more money. Why should Bitcoin be any different?

A more serious concern is that, by using what is known as blockchain technology, Bitcoin transactions are completely anonymous. A completely unregulated private-sector currency whose transactions are completely anonymous. You don't have to be a genius to see where this is leading.

As anyone who has tried opening a bank account recently will testify, governments everywhere are cracking down hard on money laundering. Most central banks have also stopped printing large denomination banknotes with both the €500 and $500 notes no longer being issued.

By making it more difficult to open new bank accounts and scrapping large-denomination banknotes, governments are trying to make life more difficult for drug traffickers, terrorists, tax evaders and other wrongdoers. Bitcoin threatens to make a mockery of these efforts.

Which is why other countries are likely to follow China's example. The People's Republic recently banned both the issue of new Bitcoin and trading in Bitcoin. No self-respecting government can stand idly by and ignore the existence of a mechanism tailor-made for criminals wishing to conduct their business and hide their ill-gotten gains.

Even if in the event that Bitcoin turns out to be squeaky clean, governments are going to be extremely unwilling to surrender control over monetary policy to the upstart. The right to issue money, and the financial benefits that flow from this right, has always been one of the key benchmarks of sovereignty.

But do the problems with Bitcoin go deeper? Nobel economics laureate Joseph Stiglitz has called for Bitcoin to be banned while former ECB council member and current Societe Generale chairman Lorenzo Bini Smaghi has called it "a scam".

Will we all wake up one morning to find that Bitcoin has been shut down and its value fallen to zero?

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