COVID-19 Economic Impact
The economic impacts of COVID-19 have reached much farther than initially anticipated. At the peak in May, more than 1.1m people relied on government support, either through the Pandemic Unemployment Payment or the Temporary Wage Subsidy scheme with workers in every sector affected. The current COVID-adjusted unemployment rate is 22.5%, down from 26.1% in May, but highlights the scale of the challenge that the Irish economy has ahead in getting people back to work, and restarting the economy.
Climate Action Plan
As Government searches for ways to counteract this, should it look first to existing policy in the Climate Action Plan (the Plan) and double down on efforts to ensure its success? The Plan includes significant development of renewable infrastructure which can stimulate investment, job creation and income generation.
The generally well-received plan published last year seeks to bring decarbonisation to the forefront of all government decisions and major investments. It clearly sets out ambitious targets across a number of relevant sectors (electricity, buildings, transport and agriculture) but the key difference between this and previous government initiatives in this area (and others) is the inclusion of detailed actions (183 in total) with specific timeframes and clearly indicated responsible cross-government stakeholders. It also already contains the governance and legislative structures to monitor and legislate for this.
The relevance of these structures and the associated monitoring processes cannot be overstated. Individual Ministers, Government departments and public sector agencies will be held publicly accountable for their targets on a regular basis. Coupled with the clear actions and timelines detailed in the Plan, this will allow for oversight and measurement, substantially increasing its potential for success.
Increased Infrastructure Development
The Climate Action Plan cemented Ireland’s target that 70% of its electricity will come from renewable sources by 2030. To achieve this, the Plan includes developing infrastructure to:
- More than double our onshore wind capacity to over 8GW, achieve offshore wind capacity of 5GW and have at least 1.5GW of solar power
- Increase interconnection to Europe (including the Celtic Interconnector) and the UK
This will take an investment spend in the tens of billions of Euros. However, these are not just targets. In addition to the governance and legislative structures being put in place, the Plan details significant government financial and policy support to make this a reality with:
- The opening of the Renewable Electricity Support Scheme (RESS) auctions, the first of which will take place later in July
- The development of enhanced planning, consenting, grid connection and policy regime for offshore wind, already underway with seven offshore wind farms currently progressing to submission for permits under the new Marine Planning and Development Management Bill
- Policy tools imminently expected to drive the uptake of Corporate Power Purchase Agreements (PPAs) to contract 15% of Ireland’s renewable electricity demand by 2030.
There are challenges, particularly regarding planning lead times and grid capacity, though these are currently being worked upon by the relevant bodies.
Not every sector is as advanced in terms of government strategy and policy as the decarbonisation of electricity, but this leaves plenty of opportunity in the other sectors in the Plan. Other key stimulus areas for the economy relating to infrastructure spend include targets to:
- Increase retrofitting (to a B2 BER standard) to 500,000 homes by 2030;
- Install 600,000 heat pumps in residential buildings by 2030;
- Support the infrastructure necessary for electric vehicles (EVs): 900,000 EVs are targeted by 2030 under the Plan
The targets around the number of homes to be retrofitted and heat pumps installed does raise questions around the level of consumer liquidity required to achieve this (even with smart financing packages etc.) and the supply chains in relation to both. However, with the appropriate government supports and focus these too could have a positive stimulus effect.
Positive Government Update
The new Programme for Government has already sought to increase some of the targets in the Plan (e.g. increasing the offshore wind target from 3.5GW to 5GW), and added others such as enshrining net-zero carbon emissions by 2050 into law though the Climate Action Bill in the first 100 days of the new coalition Government. This may have been primarily driven by climate change intentions, but it evidences how the Government can take existing policy and enhance it.
Fully utilising, and upgrading, existing government infrastructure spend, as already done under the Climate Action Plan, can potentially be a cornerstone of our economic recovery.
The new Government should also ensure appropriate alignment of the Plan with other key initiatives and funds e.g. the European Green Deal, the Climate Action Fund and the Recovery Fund.
To mitigate the significant recessionary impact of COVID-19, the new Government will have to look to all the fiscal and monetary policies within its power to put the economy back on an upward trajectory.
However, with the Climate Action Plan, the Government has at least one fundamental building block already in place given its substantial renewable infrastructure investment, on which to build not only a better economic future for the country but also a more resilient and sustainable one. It just needs to ensure that the policy and good work to date is followed through on.
Given EY’s expertise not only in renewable energy but in government policy and infrastructure development, we look forward to being a key player both in the delivery of the Climate Action Plan, and in the resultant positive economic impact on the country.