ESRI states that considerable effort is required for Ireland to reach EU emission goals

Jul 03, 2020

New research from the ESRI finds that emissions reductions due to COVID-19 business interruptions will be short-lived and will not help Ireland reach its emissions targets.

The research from the ESRI analysed how the COVID-19 crisis will impact upon the Irish economy and environment. It finds that: 

  • Irish GDP is expected to decrease by around 13 per cent in 2020
  • Economy-wide CO2 emissions are expected to decrease by 9.5 per cent
  • Low current energy prices will increase energy-demand and emissions will rise again in 2021. 

The results come from research funded by the Department of Communications, Climate Action and the Environment (DCCAE) applying the ESRI’s environment, energy and economy (I3E) model for Ireland. This work assumes that the economic structure of the Irish economy will recover in 2021. 

Co-author of the report, Dr Kelly de Bruin, said, “Though the economic impacts of the COVID crisis are severe, due to among others the decreased energy prices, we do not expect large emissions reduction as seen during the financial crisis of 2008. Ireland would still need to put in considerable effort to reach its EU emission goals. The results of the study underline the importance of havinbg a well-designed government response policy package, which considers the unique economic and environmental challenges presented by the COVID-19 crisis.”  

The main findings of the report are:

  • overall economic activity measured by real gross domestic product (GDP) will decline by 13%, depending on the duration of the restrictions. The private consumption in real terms shrinks by 15.5%.
  • The substantial decline in investment expenditures will have long-lasting repercussions for the sectoral capital stock which will prevent the Irish economy from returning to its business-as-usual pattern.
  • The decreased energy prices will help Ireland in reducing both the cost of production and the import bill which, in turn, positively affects trade balance.
  • Decreasing tax revenues due to the economic slowdown and increasing government expenditures in the form of transfers will substantially deteriorate public balances, where the debt stock will increase by 14.2%.
  • The total disposable income of all households will decrease due to the declines in both wage and capital income. The government stimulus package will play a substantially corrective role to reduce the adverse economic impacts of the crisis on disposable income of the most vulnerable household groups in urban and rural areas.
  • The initial impacts of the COVID crisis will increase inequality across household types, however, with the government stimulus package, inequality decreases.
  • From an environmental perspective, the results imply that although lower energy prices will boost energy demand, the impacts of decreased energy demand due to decreased consumption and production will be larger. As a result, the economy-wide CO2 emissions will decline by 9.5% in 2020. However, from 2021, even when assuming a gradual economic recovery, the low energy prices will result in increased emissions compared to business-as-usual, resulting in Ireland missing its 2020 and 2030 non-ETS emissions targets (by far).

Ireland risks an EU fine at the end of this year and risks not meeting the even tougher 2030 targets unless radical steps are taken to curtail emissions. 

Click here for a press release and the full report from the ESRI.