Irish households, businesses and the Government face spending a total of more than €150 billion by the end of the decade on efforts to meet interim climate-action targets, according to Davy.
The firm estimates in a new report that €129 billion will need to be invested in dedicated energy-transition measures by 2030, driven by the electrification of heating and transport and retrofitting of homes and businesses. Some 85 per cent of the expenditure is expected to come from the private sector.
The total equates to €18.5 billion a year, or 6 per cent of the current size of the domestic economy, measured by gross national income-star, over seven years.
Meanwhile, additional climate measures contained in the Government’s National Development Plan, spanning 2021 to 2030, run into the “tens of billions of euro” of planned investment, which would see the final bill likely exceeding €150 billion, said the authors of the report, led by Fergal McNamara, a senior policy director at Davy’s corporate finance unit.
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“Though these are punchy numbers, they dwarf the environmental, economic, political and social costs of doing nothing, as evidenced by the destruction and cost of recent flooding in east Cork,” said Mr McNamara.
“EU fines and reputational damage will also keep Ireland’s feet to the fire to deliver on climate change objectives or suffer even greater cost over the longer term.”
The unprecedented scale of investment is seen as necessary for the Republic to meet a legally binding target of reducing greenhouse gas emissions by 51 per cent by 2030, compared to 2018 levels, as it moves towards a goal of net-zero emissions by the middle of the century.
Still, the Environmental Protection Agency (EPA) forecast earlier this year that the State would achieve a reduction of only 29 per cent by the end of the decade. The Climate Change Advisory Council said in July that Ireland would not meet its 2030 or 2050 targets unless “urgent action is taken immediately and emissions begin to fall much more rapidly”.
While the Davy report said the Irish economy was “well-positioned to support and fund” a transition and that there was also “strong political and popular support” for climate initiatives, progress towards the targets “remains slow”.
“There are well-known and considerable inhibitors to investment including: planning, permitting and public acceptance of infrastructure, notably the electricity grid; skills and labour shortages; and global supply chain blockages,” said Mr McNamara.
Households are expected to spend €34 billion on electric cars and €23 billion on home retrofits and the installation of heat pumps by the end of the decade, according to the Davy report. Some of this will be aided by grants.
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The Government’s goal is for one in three private cars on Irish roads to be electric by 2030 and 500,000 homes to be retrofitted to a building energy rating (Ber) of B2, which is widely viewed as the benchmark for comfort and energy efficiency.
Household expenditure is expected to be financed by a combination of debt and savings, with the report highlighting that the Strategic Banking Corporation of Ireland is currently working with the European Investment Bank on a loan guarantee scheme to provide households with a competitive funding offer.
National electricity sector objectives of installing 5 gigawatts (GW) of offshore wind and additional 4GW of onshore wind capacity, as well as 6GW of solar projects and 2GW of battery storage by 2030 will cost an estimated €28 billion.
Some €10 billion is expected to be funded by way of equity by international power companies in the sector, with the remainder made up of debt, according to Davy.
The Government’s emission-reduction targets for the end of 2030 vary by sector. While the electricity sector is required to cut emissions by 75 per cent, agriculture only faces a 25 per cent reduction.
The Davy report estimates that €13 billion will need to be spent overhauling commercial buildings, while the climate bills for agriculture and industry will amount to €4.3 billion and €3 billion, respectively.
The firm estimates that a further €200-€250 billion will need to be spent in the State between 2030 and 2050 in order to reach net zero.
