Friday 18 October 2019

Colm McCarthy: 'Punishing Ireland will only send carbon emissions higher still'

The planet shares just one atmosphere but our dutiful farmers have become the victims of the blame game, writes Colm McCarthy

(Stock picture)
(Stock picture)
Colm McCarthy

Colm McCarthy

Irish livestock farmers and Chinese steel producers have something in common. Both are successful exporters, both generate substantial greenhouse gas emissions and both are in the firing line in the debate on climate policy.

The world has outsourced some of its carbon emissions to China, whose internal consumption of carbon-intensive goods falls short of domestic production, much of which goes for export.

In the same manner the rest of the world has outsourced production of dairy products to Ireland.

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The Chinese government is not shy about reminding steel importers to lay off the blame game. Irish livestock farmers are not so lucky.

China is not a member of the European Union, which has adopted production-based emission limits for each member state.

If it were, it would face fines resulting from the export success of its heavy industries.

Ireland is a dutiful member of the EU, has agreed to tight emission targets and is scrambling to meet them. The situation calls out for a fall guy and the farmer, responsible for about 30pc of national greenhouse gas emissions, is a plausible candidate.

In the Irish edition of the Sunday Times last week, Conor Brady did not spare the lash, saying: "Much of the agricultural sector will have to be reinvented to enable the state to meet its obligations to reduce harmful greenhouse gas emissions. To do that, much of what has been built up over generations, economically and socially, will have to be deconstructed."

The world may be using too much steel and eating too much cheese but it does not follow that China is the best place to shut steel plants or Ireland the best place to cull dairy herds.

The source of this misdirected blame-game is the unwillingness of the world's governments to discourage the consumption of carbon-intensive goods and services, wherever produced. The planet shares just one atmosphere and there will be no effective climate policy until a universal emission-charging regime is instituted.

Europe is not the worst offender: per-capita emissions are lower than other prosperous parts of the world and there is a more pro-active policy stance, including heavy carbon-reducing taxes on motoring and road freight.

But the EU's enthusiasm for production-based national emission quotas has led worldwide climate policy astray and their enforcement is encouraging costly and ineffective policies in Ireland.

Outside Europe, responsible for just 11pc of worldwide emissions, national production-based emission quotas, the preferred policy since the Kyoto agreement in 1995, are voluntary and aspirational.

And they have failed, as attested in the persuasive reports of the UN's Intergovernmental Panel on Climate Change.

Their failure is unsurprising: everyone is incentivised to let everyone else make the effort and only Europe has made headway.

Saudi Arabia produces oil, which is consumed in Ireland. The carbon emissions are counted as part of the Irish total.

Ireland produces dairy products which it sells to Saudi Arabia. The carbon emissions, you would imagine, count as part of the Saudi total. And you would be wrong. They also count as part of the Irish total, so there is pressure to constrain the livestock industry in Ireland.

It would be foolish to count the carbon emissions from oil products as part of the Saudi total, demanding reductions in Saudi output.

Saudi Arabia is just about the cheapest place there is to produce oil and it would be nuts to constrain production there, diverting it to places where the costs are higher.

The same goes for Irish dairy farming: if you believe Ireland is a low-cost producer, it makes no sense to divert output to places where costs, including carbon costs, will be higher.

Irish livestock products are actually "carbon-efficient", in the sense that emissions per unit of output are lower in temperate regions which employ grass-fed production systems.

If oil from Saudi Arabia had lower carbon emissions per litre there would be a case for encouraging rather than constraining its share of world output. Butter and cheese from some countries and regions pass this test - the associated emissions of greenhouse gases are lowest in the countries with the most suitable soil, climate and production systems. According to the European Union's Joint Research Centre this is precisely the position with Irish livestock farming. If emissions of greenhouse gases associated with a unit of product in Ireland amount to 1 kilo, the European average is 1.4.

Any restraint on Irish output substituted by increased output elsewhere in the EU will likely result in rising Europe-wide emissions. This perverse outcome is always a risk with national production-based emission targets.

This risk was pointed out by economists 30 years ago when the first steps were being planned towards an agreed, worldwide policy to address climate change.

The science of climate change is ferociously complex but the economics straightforward: if the consumption of certain goods and services entails damaging emissions, these should be measured, and reflected fully, in the price charged. This sends the right signal to consumers but does not distort the geographical pattern of production.

Create new technology with lower emissions and you will enjoy a cost advantage. Technological solutions and carbon taxes are not alternatives, they are complements.

There is no coherent worldwide policy designed to inhibit consumption of the products and services which cause emissions.

In Europe, where no more than one-tenth of worldwide emissions are likely to originate in the decades ahead, national production-based targets are deployed instead.

The remaining nine-tenths will arise in China, the USA and the rest of the world, where emission control is voluntary.

Even if Europe were to do everything possible, failures elsewhere would be enough to court disaster. For every tonne of greenhouse gases emitted in Ireland, about 830 tonnes arise somewhere else.

The earth has just one shared atmosphere but has close to 200 governments. Can you imagine a universe in which all 200 countries would have the right incentives to adopt sensible policies independently? It would consist of 200 separate planets, each with its own atmosphere, spinning through space with no trade between them. Failure would guarantee extinction, planet by planet, and the benefit of emission reduction would accrue entirely to those making the effort.

The Irish government accepted demanding EU targets for 2020 greenhouse gas emissions in 2009 and may fail to meet them. Of the 27 countries covered, 12 were invited to increase emissions by amounts ranging from 1pc (Portugal) up to 20pc (Bulgaria).

The remaining 15 were expected to cut emissions, on average by about 14pc. Three countries accepted the highest target reduction of 20pc - Ireland, Denmark and Luxembourg. This approach fails, by design, to identify the least-cost path of containing climate change and of Europe's contribution to that objective. Only a universal carbon charging system on consumption will lead to the least-cost solution.

In the meantime, the Irish government could do better than tinker with farming.

It could end subsidies for high-emission peat-fired electricity generation, pursued alongside corporate welfare for intermittent and increasingly inefficient wind-farms. And it could campaign for European carbon taxes on air and maritime transport, currently exempt from VAT and excise.

Sunday Independent

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