EU ETS and Competitiveness of Irish Industry

EU ETS and Competitiveness of Irish Industry

Project Title:   EU ETS and Competitiveness of Irish Industry

Researchers: Dr. Celine McInerney (Principal Investigator), Dr. Bernadette Power (Co- Principal Investigator), Dr. Paul Deane (Co- Principal Investigator).

T: 021 4902839

E: c.mcinerney@ucc.ie

Funding Body: Environmental Protection Agency

Project type: 2016 Climate Research Call

Period: 16 months from January 2017 to April 2018

Project Description:

This research project will assess the potential impact of proposed changes to the EU emissions trading scheme (EU ETS) on the competitiveness of Irish industry using a number of approaches.  In the first phase, a literature review will quantify and document international experience of the effect of emissions trading schemes on industry competitiveness. The economic impact for Ireland will then be examined using microdata from the Census of Industrial Production (CIP) (2012-2015) on emissions and power costs by industrial sector. Some tentative findings will also be presented for non-traded sectors based on the Annual Services Inquiry.  These datasets are collated by the Central Statistics Office. This will be followed by a survey of Irish companies (large energy users and heavy emitters) who are participants in the EU ETS to assess their capacity to trade and mitigate emissions effects on their businesses and also to assess how prepared they are for proposed system reform from 2020. The project will also analyse existing EPA data on emissions trading to establish trading patterns and trends by sector.  Using a European energy systems electricity model, the impact of variable emissions prices for electricity prices will be examined to assess the impact of carbon pricing and the carbon intensity of Irish electricity for Irish competitiveness and also the attraction of Ireland as a location for investment for industry. We anticipate that due to high renewables penetration which reduces electricity prices, Irish industry may in fact have a competitive advantage. These results will be compared with global and EU studies to benchmark Ireland’s position.

This project will provide recommendations to policy makers on the potential supports and interventions required to help Irish companies mitigate and potentially exploit variable costs of carbon emissions and the second order effects of emissions on power prices. It may also make recommendations on potential supports and interventions required to prepare Irish businesses for deep decarbonisation scenarios and potential impacts of reform on competitiveness. It is likely that Irish companies may need to more proactively engage in energy efficient investment and streamline production and procurement practices. Schemes such as Green Enterprise, Accelerated Capital Allowances for Investment in Energy Efficiency Equipment etc. may need to be more actively promoted to Irish corporates to achieve these goals and indeed new fiscal incentives may be required (mindful of State Aid considerations). Policy interventions to support the uptake of energy management best practices such as the ISO50001 standard may also need to be actively promoted. Early adoption by Irish business may yield them a competitive advantage on global markets.

Environmental Research Institute

University College Cork, Lee Road, Cork

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