In between Tuesday’s Budget day in the Dáil and Friday’s war-time meeting of EU energy ministers in Brussels, Green Party leader Eamon Ryan sat down with The Currency to discuss the links between the two. The bulk of the interview focused on the portions of the phenomenal €11 billion budget expansion secured by the two portfolios under his remit – Environment and Climate Action on the one hand, and Transport on the other hand.

But in the immediate, after Minister for Finance Paschal Donohoe said in his budget speech that Ireland aimed to take part in an EU-wide tax on windfall profits from energy companies, what does his colleague Ryan expect on this front from his meeting today with EU counterparts?

“I’m quite confident, I think we will get agreement,” he said. This applies to both the proposed rule changes on so-called inframarginal pricing, to decouple electricity prices from those of gas, and to the taxation of excess profits linked to war-induced high fossil fuel prices.

The electricity pricing proposal aims at separating out situations where power is not generated by gas – in Ireland’s case, from renewable sources. “It is complicated, because there are all sorts of different contractual arrangements in the market there,” Ryan acknowledged. Some suppliers are locked into fixed-price agreements, others benefit artificially from the higher electricity prices set elsewhere by the gas-fired suppliers of last resort.

“But it is the right thing to do. I think even from the wind industry itself, it recognises and indeed other generators here recognise that they also need social licence,” Ryan said. “Some of the extraordinary profits that would arise are purely a function of the war, not of any kind of enterprising. So I think it’s appropriate for us to recycle that back into the electricity market so that consumers benefit.”

He applies the same logic to the proposed “solidarity contribution” on fossil fuel extraction – in Ireland’s case, gas from the Corrib field: “I think all 27 countries agree: We can’t just see these incredible profits just accrue to the fossil fuel companies on the back of nothing other than energy being used as a weapon of war.”

Among issues remaining to be finalised is the time covered by such exceptional measures. Ryan said that rules drafted by the European Commission would apply to 2022, and left the option open of an extension to 2023. “I think that makes sense, because, unfortunately, in our discussions at the European Council level, I think there’s a clear understanding that we have to start preparing for this as a two-year, not a one-year event,” he said. 

While EU gas storage facilities are now filled for this winter, “the question would be if you have a similar situation next spring and summer, how would Europe as easily fill up some of the gas storage stocks? It’s likely, if the war doesn’t end, that it could be a two-year difficulty that we’re facing into and we have to plan and prepare for that.”

This sounds pessimistic but prudent. Yet when the discussion centres on Ireland’s Budget 2023, Ryan adopts a more deflationary outlook and expects that a global slowdown in demand caused by the current cost-of-living shock will dampen prices in key sectors under his watch, from energy retrofitting to transport infrastructure.

And if the worst comes to the worst, he claims those sectors would absorb job losses caused by a recession elsewhere. 

Listen to Ryan’s Budget 2023 interview in full above or read it below (lightly edited for length and clarity).

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Thomas Hubert (TH): I want to start with a kind of a broader view of the budget and the way it’s been going the last three years. It’s been three successive crisis budgets: Covid and now cost of living. And we’ve another parallel budget now, a carbon budget, that is not yet guaranteeing the cut in half in emissions for this decade. It is falling short, at this point, with the sector-by-sector targets you’ve published. So are we going to get a crisis budget for climate at some point and get back on track on that aspect?

Eamon Ryan (ER): The way we’ve designed our climate law, it is an iterative process. We will go back with a revised Climate Action Plan 2023 this November and the law does show that if you’re off track, ministers in each sectoral area have to adjust.

I believe the war in Ukraine, and the energy crisis that it has initiated, is going to accelerate the decarbonisation transition. It’s a crisis centred around our over-dependence on imported fossil fuels and the high price of those fossil fuels. So if you look at each of the areas where we need to make the transition – in retrofitting buildings, in development of renewables, in more sustainable transport modes, in transformation in agriculture – they would all be accelerated by what’s happening in this war.

I think we can see that the strategy we put in place from February for retrofitting is starting to work. If you talk to the industry, I’m sure they’d agree that they’ve never been busier. There’s real financing certainty and this budget continued in that path. It’s a steady increase. It’s not a breaking news story as it were, because the revenues from the Carbon Tax go to retrofitting, they increase each year. We’ve had constraints in recent years more on the supply side than on the budget side: having enough workers, the contractors being able to scale up. But I think what we’re starting to see happening now is that scaling up and we will accelerate it – not just we but I think the Irish public are going to switch to retrofitting in a way that we’ve never seen before at scale.

Secondly, on renewables, it’s less of a budget issue because most of the costs are borne by the industry, and our grid investments are not directly aligned with budget decisions. But what is clear is a solar revolution taking place. Again, if you talk to industry, business, as well as households, there’s a huge increase in the deployment of solar power in the country. 

In offshore renewables, I’m in the process of agreeing the maritime area consents for the first phase of offshore renewable projects. They will go into auction this autumn and into planning next year, subject to who gets through the auction process. It’s absolutely first priority, centre-stage in the government’s economic strategy to do everything to make that work: to make sure that our planning system is quick; to make sure that on the offshore renewables energy policy, we have a task force they’re working to; to make sure we have the ports available for deployment. I see that accelerating because of this immediate crisis.

ER: And lastly, because of the war and the high price of fertiliser, I think our fertiliser use this year – we won’t know until the end of the year, but we estimate maybe about 20 per cent reduction in the use of fertiliser. If we can show, in this incredibly strained, difficult time, that we still get the output, that we still have the fodder and the ability to feed our animals and provide the food we need while reducing fertiliser use by that sort of quantum, I think that’s a path towards the transition.

Again, in the budget, there was half a billion euro for agro-environmental measures. I think that’s transition. People talk about the farming community being opposed to this – I don’t think they are, actually. I think they increasingly realise this is where they can cut costs. This is where there will be new income streams, the likes of solar in the field, the likes of anaerobic digestion. It is now going to happen and they know that, and I think they know that’s where the funding is going to be.

So across all four areas in agriculture and transport, in energy and energy efficiency, retrofitting, I think what’s actually happening is even some of the work we’ve done in the last two years is starting to pay off. It is starting to accelerate, and emissions will come down with that. If they don’t come down enough, then we have to adjust and go further.

TH: I want to look in a bit more detail at some of the measures in the budget relating to what you’re mentioning here. You’ve started with retrofits, that’s clearly where the most increased money is going towards. As you said, maybe the question now is how to spend it. Will we have enough skilled workers? How do we target it? Who is going to get their homes retrofitted first? How do you see the fine-tuning of that large budget that you have now? (It’s gone up by more than €120 million, I think, for next year.) 

ER: The priority is to get it socially progressive. So out of that very large purchase, some 60 per cent is going for the likes of the Warmer Home Schemes where you are targeting those houses at risk of fuel poverty and you’re providing 100 per cent grants. For other parts of the market, there’s an 80 per cent emergency cash grant for attic and wall insulation and a 50 per cent grant across all other sectors.

The industry is starting to see a huge expansion. As I said, there has been constraints around contractor availability or availability of workers. I think part of that was that, historically, this was always very badly planned. It was always stop-start. Contractors were waiting each year to know what their grant budget would be. So they would shut down effectively for seven months, and then try and start up again. That has changed, where it’s now round the clock, all year round. And I think that is starting to see them scale up.

What I suppose was also significant in the budget was the commitment towards additional apprenticeship places, Skillnets courses, and making sure we resource the training and education system to provide those workers we need. I think what will also happen – nothing is certain in this world, but I think some of the contraction in other elements of the economy that will come because of the cost-of-living crisis will see some workforce become available. What I’m certainly saying to everyone is: If there is any loss of jobs in other sectors of the economy, we will have the door open and we’ll be expanding the employment.

TH: That’s kind of required because otherwise, we’re facing inflation already in the construction industry and we need more homes. So between construction and retrofits, if there isn’t a lot more capacity, we’re looking at higher prices, aren’t we?

ER: We have to avoid that. I think some of the supply chain difficulties, I was just hearing recently, are starting to improve. There’s been a huge difficulty in construction inflation because of a whole range of materials, not just fossil materials, but others. My assessment – this is only straws in the wind, a little bit, but look at the international price of container traffic, it has gone through the floor recently, having been incredibly high as one element in that high cost.

I think that’s reflecting that we’re going into, probably, as the OECD and other economic forecasters are saying, a very significant drop-off in economic activity globally. I think on the back of that, we can expect some of those high commodity prices and high shipping prices and other elements that added to the inflationary impact to start to diminish. And I think that would help the retrofitting industry avoid that inflation.

“How do you want to spend your money? Do you want to spend it in free public transport fares? Or do you want to spend it in new and additional services?”

TH: Outside retrofitting, you’ve mentioned other ambitions in public transport, for example, but it strikes me in the budget itself that there isn’t a step change in funding compared to the €11 billion package across the entire budget. Public transport is relatively static in funding. “Climate action and environmental leadership”, as far as I could see, was presented as an increase, but it’s actually not increasing. So was that put on the backburner with the cost of living?

ER: No – two things you have to remember: The key funding in transport is largely capital, current is a relatively small element of it. In that, we, I think, did very well in the National Development Plan. We’re one of a few departments, if only, which was able to get a 10-year commitment because transport investment is such a long-term ground. That €35 billion funding we got commitment for was very significant in scale and in certainty. Therefore, we work within that, the budget negotiation wasn’t really around the capital side.

What we did do on the current side is particularly important to my mind. The really important strategic decision for us in this budget was to retain and extend the 20 per cent reduction in fares for all public transport users, 50 per cent for those under 24. It is a significant commitment. We have a very large PSO [public service obligation] support for public transport. I think that was the most important thing we had to get and it wasn’t certain in a budget where, even though there was an €11 billion expansion, we knew most of it was going to have to go towards social welfare protection, business supports, those sort of interventions. To be able to retain the public transport fee reductions, in my mind, was the big win.

TH: You’re presenting it as a big win. But at the same time, I was in Paris two weeks ago: In the entire Paris region – 12 million people, the size of Leinster pretty much – every single trip in that area has been capped at €5. In Germany, it’s €9 a month for unlimited public transport. We’re very far off those targets.

ER: I’m not sure the Germans have extended that, I’m sure they’d like to but…

TH: Certainly for part of the year, anyway. And we’re offering public transport that is a lot more limited than those countries, for a lot higher price. Should we not just make it free when we compare the quality to price with those countries? Was that a consideration at all to go beyond the 20 per cent?

ER: We looked at all options. But I think it’s true what you said, our public transport network needs to expand. We want to introduce new rural bus services under Connecting Ireland, we have to deliver the BusConnects services. And when we do, we’ve seen already, in the routes that we’ve opened up, a big increase in patronage. So we want to go further.

Then you have a choice as minister. Okay, how do you want to spend your money? Do you want to spend it in free public transport fares? Or do you want to spend it in new and additional services? I think we need the new and additional services. I think the 20 and 50 per cent reductions are not insignificant. In my mind, I think the public have responded. We’ve seen, in a lot of areas particularly outside Dublin, a real increase in passenger numbers. My view is that’s where we should put the resources: additional services.

Offshore wind: “We have to be faster”

TH: On renewables, offshore wind is really going to be the next big step, the workhorse for this decade. We were both at the offshore wind conference a few days ago. They told us the developers, as you said, the industry has the money to put behind this and to actually invest in the wind farms.

But they said there are two things they need: ports to deploy it, and Irish ports aren’t currently able to deploy wind farms at scale; and they need the capacity in Mara, the new marine planning agency, and in An Bord Pleanála when they actually go to planning for the final projects that are confirmed that they don’t wait. They say it’s taking months in Ireland, weeks in the UK for the same processes to get through planning. Does the budget add the resources for ports and for planning to make that happen?

ER: It’s vital that we do. An Bord Pleanála, in my understanding – it’s Department of Housing, but it has established a new maritime unit specifically to help address this. We will, from Government, issue clear directions to An Bord Pleanála in the near future, which says that we do have to be quick – get that environmental policy planning right, obviously, but we do have to improve and accelerate our permitting process times, not just in planning but foreshore as well. Mara will have a very significant role in helping that happen.

You’re right as well that one of the key constraints is around port availability. There are two different types of ports. We will have a significant number of operation and maintenance ports around the island. But the larger deployment ports are likely to be in the likes of Rosslare, Cork, Shannon-Foynes – you could pick a number of other different potential candidates. And yes, on that, we have established an offshore taskforce. One of the key projects in that is to make sure that we can and will have the deployment ports available.

The UK is ahead of us. The UK has been building and developing offshore wind at scale in the last 10 years, so they do have real experience in that. We can learn from that. I think a lot the developers who will be in the first phase (the “relevant projects”) are very large international developers, and Irish but who have experience from what they’ve done in the UK. I think we can also learn from their experience in terms of the auction system where still, even in these high inflation times, they’re delivering very low-cost auction results. I think we gain from learning from the UK, but we have to be fast. I literally had a meeting earlier this morning when I was saying – I’m constantly saying – we have to be faster, we have to give real clarity and certainty. I think we can and will do that.

TH: The ports developments, especially: Do you see that as a state investment or industry and private investors coming in?

ER: It’s a mix, each port has different circumstances. Some of the deployment areas are private lands and others are state. But even when the state has a role – the likes of Rosslare, for example, where Irish Rail obviously would be the operator of the port – the main financing will, in my mind, come not from state capital investment but from financing from the market, where they know that they’ll get an income stream to cover the cost of construction.

There may be other elements or parts of the infrastructure that might be needed – transport or other elements. But the primary financing mechanism, from my conversations with the port companies, is that they see that they can finance this. There’s a very large amount of capital looking to invest in this sort of infrastructure. So primarily, it will be private finance. 

TH: I want to spend a few minutes on what happened with the Carbon Tax. So the Carbon Tax increase is going ahead as planned but the Nora [National Oil Reserves Agency] levy on the same fuels is being cancelled in this budget. Is that short-term, long-term?

ER: Short-term, to the end of February. We did plan to do it last year but didn’t do it, we did an excise reduction instead. There is an issue going through this winter that, in my mind, there would be a lot of businesses and households which have high oil costs still, even though it hasn’t gone up as much as gas. A lot of the support mechanisms, the likes of business supports, very much target within the European framework towards gas and electricity. So I thought it was appropriate to have an oil component as well.

The Nora levy does that. It’s not just for transport, it’s for heating as well. The funding that it raises goes into the Climate Action Fund. We got agreement from Government that that will be paid directly by the Exchequer, so it doesn’t diminish the revenues we need on climate action. It is a temporary measure to get us through the winter period.

TH: So after February, we’re back with the Nora levy as before and your plan to allocate it entirely to the Climate Action Fund is back on.

ER: Yes. I mean, you do have to make sure – the Nora levy also has a strategic purpose in terms of maintaining our oil stocks. But the Nora is well funded. We have, I think, 85 days’ reserve out of our target of 90 days, even though we’ve sold a lot of stock in the last year in response to IEA [International Energy Agency] calls. We will still need a strategic oil reserve but the funding this year and next has been towards the Climate Fund and that will continue.

TH: I’m asking about this because there was a comment from Fuels for Ireland recently (the oil distributors) saying that they had challenged that allocation of the Nora levy to the Climate Action Fund and the fact that it was suspended in the budget was a win for them. Is there anything happening there that we should know of? 

ER: No, no.

TH: It’s back going into the Climate Action Fund from the end of February.

ER: I don’t think they had any involvement in that decision one way or the other at all.

TH: The other source of criticism of the Carbon Tax is Sinn Féin. Was there a kind of give there to undercut Sinn Féin and say, actually, this winter, there is no equivalent of the Carbon Tax, we’re kind of giving that away?

ER: I think it’s interesting Sinn Féin’s own budget submission, if you look at that, they included the Carbon Tax in making their money balance. They do the same every year. They say: “Oh, we won’t increase it.” And they take the last year’s increase and put it into their own budget figures because they don’t have an answer to the question: How do you fund the retrofitting? How do you fund the agri-environment schemes? How do you progress the social contributions that we made from the carbon fund?

So I think it’s a bit rich when each year, they say “We’re against the Carbon Tax increase” and then the next year, they put it into their own budget projections as vital, particularly for some of the social justice end of climate action. So I’d take their arguments with a pinch of salt on it.

Ryan on the Temporary Business Energy Support Scheme

While households are now familiar with electricity bill rebates, which will be repeated this winter, Budget 2023 introduces a new scheme covering up to 40 per cent of the year-on-year increase in businesses’ electricity or gas bills up to €10,000 per month, with exact qualifying criteria yet to be unveiled. Ryan said:

“Our department was very involved with Finance and DETE (Department of Enterprise, Trade and Employment). I think we had a very significant role in saying that it should be related to energy use and that it should be targeted to small, medium industries because there’s real potential employment risk of loss of jobs. 

I think we also felt that the lessons learned in the Covid schemes (the Criss scheme is the most equivalent) were ones we could apply, in a sense of it being self-declared, and Revenue having a key role in administering, reviewing and monitoring the scheme. It took about a month or two of negotiations or discussions around that but I think it landed and ended up in the right place.

It won’t be perfect. What we learned from Criss and other schemes is that there is always immediately anomalies where certain business is not included. It helps that there is a separate fund for larger energy users. I think that was appropriate, they have different circumstances. So in the end, we were happy with the way it was designed, the way it’s going to be implemented. We’ll have to see as it is applied. 

Also, there’s such uncertainty in the future price of energy. Even if you look at what’s happened in the last four or five weeks, at the end of August, the prices was trending up to about 700 pence per therm if you take that measure. It’s probably close to 500 now. It’s uncertain. The futures market has stayed relatively stable around that mark but no one knows exactly what is going to happen next in the war. 

So I think we have to constantly just review it, therefore the approach where we get through this winter and then review in March makes sense. We’ll have a better idea of the forward energy prices then. There’s one or two slight straws in the wind that may help. I haven’t looked at Brent crude today, but it has come down from some of the heights and that will help us.”

TH: The final budget measure I wanted to ask you about is the proposed 10 per cent levy on concrete and the debate it’s kicked off. From your green perspective, there are very different types of concrete and very different carbon footprints associated with them. We have a kind of champion in green cement in Ireland in Ecocem, are you considering maybe varying that depending on the type of concrete or cement being used?

ER: On every occasion, we’re looking to try and reduce emissions, including embodied energy in buildings and in other infrastructure. So yes. There was a lot of debate in the Dáil yesterday [Wednesday], I think it’s probably the one of the budget measures that raised most concern.

I believe it was correct to apply the levy. The fact that the state is facing a multi-billion-euro bill, the public’s money having to pay for the flaws in that industry, the failures of that industry means that I think it is appropriate that they pay a contribution to the redress we’re going to have to apply. But yes, as we do that, I’ll be saying to Darragh O’Brien, in any way that we can support lower-carbon materials, we should do it, including in this one.