Public Policy Bulletin, 5 May 2020

May 05, 2020

In today’s bulletin, read about the Government’s newly announced €6 billion support package for businesses. Fianna Fáil, Fine Gael, and Green Party are set to start formal negotiations for Government formation on 7 May 2020. On the EU side, read about the European Commission’s new Circular Economy Action Plan, and the Council of the EU’s adoption of an EU-wide classification system, or "taxonomy” in a bid to promote sustainable investments. On the UK side, you can read about their updated guidance on meeting post-Brexit climate change requirements from 1 January 2021.

Government announce a support package of over €6 billion to support businesses impacted by COVID-19

The Irish Government announced on 2 May 2020 a suite of measures to further support small, medium and larger business that are negatively impacted by COVID-19. With the total package amounting to over €6 billion, the measures include:

  • A €2 billion Pandemic Stabilisation and Recovery Fund within the Ireland Strategic Investment Fund (ISIF), which will make capital available to medium and large enterprises on commercial terms
  • A €2 billion COVID-19 Credit Guarantee Scheme to support lending to SMEs for terms ranging from 3 months to 6 years, which will be below market interest rates
  •  The ‘warehousing’ of tax liabilities for a period of twelve months after recommencement of trading during which time there will be no debt enforcement action taken by Revenue and no interest charge accruing in respect of the warehoused debt
  • The waiving of commercial rates for a three-month period beginning on 27 March for businesses that have been forced to close due to public health requirements
  •  Provision of a Restart Fund for micro and small businesses of €250 million for micro and small enterprises

This announcement followed the publication of the Government’s Roadmap for Reopening Society & Business, which sets out a five stage plan (starting 18 May 2020) to ease the COVID-19 restrictions and reopen Ireland’s economy and society.

 

Fianna Fáil, Fine Gael and Green Party to start formal negotiations for Government formation on 7 May 2020

The leaders of Fianna Fáil, Fine Gael and the Green Party have agreed that formal negotiations on a programme for Government will begin on Thursday 7 May 2020. This comes as an update to Fianna Fáil and Fine Gael’s response to the Green Party’s 17 demands. These demands formed the basis of agreement on a programme for government to implement measures to revive the economy in a sustainable and environmentally friendly manner. The six-page letter, penned jointly by the two main parties, attempts to answer the posed questions as clearly as possible. As a key highlight, the two main parties have also committed to introducing a new Climate Bill within the first 100 days of a new Government. The Bill will enshrine in law the target of carbon neutrality by 2050.

The Green Party had previously called on Fianna Fáil and Fine Gael to commit to reducing greenhouse gas emissions by at least 7 per cent per year, if they are to enter Government. In response to the policy framework document, the party made 17 demands of the two larger parties, such as a commitment to end Direct Provision and the introduction of a universal basic income.

As of now, the two main parties only have 72 Dáil seats between them, eight short of a majority of 80 required to form a government, thus leading to talks about forming a coalition. They are hoping to entice smaller parties, including the Green Party, the Labour Party and the Social Democrats, to increase their Dáil numbers.

 

Carbon Tax increase announced in Budget 2020 came into effect on 1 May 2020

The carbon tax increase announced in Budget 2020 came into effect on 1 May 2020. The carbon tax, introduced by the budget in October 2019, added 6.5 cent to every litre of petrol and diesel. However, the tax also introduced a tax increases on home-heating fuels. This increase had been postponed until today. The tax was raised by €6 to €26 per tonne of carbon dioxide in last year's budget, and will add €2.73 to a 40 kg bag of coal, 59 cent to a bale of briquettes and €65 to every fill of a 900-litre home heating oil tank.

The carbon tax does not apply to electricity, where a public service obligation (PSO) levy is applied instead. The Government introduced the tax as part of a global deal to cut the level of emissions in Ireland. By increasing the carbon tax, the Government hopes to incentivise citizens to use fewer fossil fuels which cause climate emissions and climate change.

In June 2019, Chartered Accountants Ireland responded to the Department of Finance’s consultation on the options for the use of revenues raised from increases in carbon taxes, saying that to the achieve acceptance taxpayers would have seen a direct link between the carbon tax collected, what the additional revenues are spent on and how they benefit, with revenues from the carbon taxes being ring-fenced and the poorest households protected by a series of targeted reliefs through the tax and welfare system, starting with an increase in the fuel allowance. 

 

Europe’s new Circular Economy Action Plan

 On 11 March 2020, the European Commission adopted a new Circular Economy Action Plan. The plan is one of the main blocks of the European Green Deal, the European roadmap for climate neutrality and Europe’s new agenda for sustainable growth where economic growth is decoupled from resource use, presented by the von der Leyen Commission on 11 December 2019. It claims that “applying ambitious circular economy measures in Europe can increase EU's GDP by an additional 0.5 per cent by 2030 and create around 700,000 new jobs”. The initiatives in the plan build on the work done since 2015, when the European Commission launched its first Circular Economy Action Plan.  

The new Action Plan aims to modernise and transform the European economy while protecting the environment, making the European economy fit for a green future, strengthening competitiveness, and giving new rights to consumers. The plan also supports innovation and investment by mobilising private financing in support of the circular economy through EU financial instruments such as InvestEU. It also introduces legislative and non-legislative measures targeting areas where action at the EU level brings real added value.

The Circular Economy Action Plan presents measures to:

  • make sustainable products the norm in the EU;
  • empower consumers and public buyers;
  • focus on the sectors that use most resources and where the potential for circularity is high, such as: electronics and ICT; batteries and vehicles; packaging; plastics; textiles; construction and buildings; food; water and nutrients;
  • ensure less waste;
  • make circularity work for people, regions and cities;
  • lead global efforts on circular economy.

Find more information about the Circular Economy Action plan in this factsheet and in a Q&A answering frequently asked questions about the plan.

 

Sustainable finance: Council adopts a unified EU classification system

On 15 April 2020, the Council of the European Union (“EU”) adopted a regulation setting out an EU-wide classification system, or "taxonomy", which will provide businesses and investors with a common language to identify those economic activities which are considered environmentally sustainable. The common classification system is to encourage private investment in sustainable growth and contribute to a climate neutral economy.

The taxonomy will enable investors to refocus their investments on more sustainable technologies and businesses. It will be key to enabling the EU to become climate neutral by 2050 and achieve the Paris Agreement's 2030 targets. These include a 40 per cent cut in greenhouse gas emissions, for which the Commission estimates that the EU has to fill an investment gap of about €180 billion per year.

The future framework will be based on six EU environmental objectives:

  1. climate change mitigation;
  2. climate change adaptation;
  3. sustainable use and protection of water and marine resources;
  4. transition to a circular economy;
  5. pollution prevention and control;
  6. protection and restauration of biodiversity and ecosystems.

The taxonomy for climate change mitigation and climate change adaptation should be established by the end of 2020 in order to ensure its full application by end of 2021. For the four other objectives, the taxonomy should be established by the end of 2021 for application by the end of 2022.

The regulation needs to be adopted by the European Parliament at second reading before it can be published in the Official Journal and enter into force.

 

Changes to UK’s climate change regulations, emissions trading, ecodesign and energy labelling

Guidance has been published by the UK Department for Business, Energy & Industrial Strategy on how climate change regulations, emissions trading, ecodesign and energy labelling will change from 1 January 2021. The most recent update says that the EU ETS will continue for the 2019 and 2020 compliance years during the transition period from 1 February 2020 to 1 January 2021.

The EU Emissions Trading System (EU ETS) is a cornerstone of the EU's policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively. It is the world's first major carbon market and remains the biggest one.

 

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