The Cost of Inaction & #cattlebubble

How do we budget in the coming years so that we can pay fines for not taking action to reduce our green house gas emissions? Where will the money come from? Healthcare? Education? Welfare? Pensions? They are the burning questions I will take away from the first ever National Economic Dialogue #NED15 held on July 16-17 2015 in Dublin Castle.

Forgive me for being enthusiastic when I selected the break out session “Working for the best, preparing for the worst : Challenges to our economic and fiscal development”. I was delighted to see climate change mentioned in the guiding questions:

  • Horizon scanning – what are the key domestic, international and environmental risks and challenges to our economic future over the next 10 years?
  • How can we most effectively prepare for these risks including climate change?
  • How should we manage and mitigate risk in designing economic and fiscal policy and in the annual budgetary process?

This could mean that the government were making sure climate change was on the agenda just in case participants didn’t bring it up. Or it could mean that it’s such a massive threat to life on earth that they felt we needed to focus on it, take it seriously. Either way I welcomed the opportunity to explore the economic risks associated with it.

I was pretty gobsmacked when I realised the actual reason climate change was on the agenda. They’re concerned about how to pay the fines we will have to pay when we don’t meet our targets for greenhouse gas emissions!!! We were asked, if it were up to us individually, how would we budget for the fines. That is not the question of a government committed to future generations. That is not the question of a government who takes climate change seriously for climate justice reasons. That is not the question of a government promising long term thinking. That is not a government who gives a damn about anything but economic growth.

The lack of commitment to actually take climate change head on is staggering. We live in a time devoid of heroes. There are no knights in shining armour leading the charge in government. Nobody has the nerve to lead on climate change. We are led by pawns in the global economy.

Ahead of the meeting I jokingly took a picture of a dvd box set I saw while doing my preparations. In hindsight I don’t think I was far from the reality of our situation given the quality of the leadership we have! 

Below are my notes ahead of the workshop which formed the basis of my input. Some proposals are taken from the Environmental Pillar draft budget proposal.

In the closing plenary where feedback from the workshops was shared there was a little giggle at the phrase I coined during the workshop with Alan Kelly. I emphasised the need to diversify in our land use and grow more food crops. I warned that we are merely replacing the housing bubble with a #cattlebubble. People seemed to think this was amusing. I wouldn’t be so quick to laugh it off. They will have forgotten these warnings when farmers are stuck with herds of dairy cattle and an unsustainable market.

Theresa O’Donohoe – July 2015

Horizon scanning – what are the key domestic, international and environmental risks and challenges to our economic future over the next 10 years?

Food security

We are replacing the property bubble with the cattle bubble. Food is renowned as our main driver of economic growth. It is an indigenous economy and is likely to last longer than any foreign direct investment.

However our food industry is changing. It is becoming focused on cattle.

Consider land use. If our arable land is devoted to feeding our cattle industry – be that for grazing in the fields or cutting for storage, we are putting all of our eggs in one basket. One outbreak of a serious bovine disease could completely destroy the whole industry from beef to all dairy produce. That’s pretty much similar to the property bubble.

National Risk Assessment (all italics) identifies food risks:

7. Climate Change & Extreme Weather Events

Ireland’s climate is changing. The scale and rate of change is consistent with regional and global trends. These changes are projected to continue and increase over the coming decades. Nationally, climate change will have wide ranging impacts on the environment, society, and the economy and associated sectors, including water resources, agriculture and food security, human health, terrestrial environments, critical infrastructure, biodiversity, and coastal zones.

9. Food Safety

A food scare could arise from contamination of an Irish food product or a significant outbreak of food-borne human illness associated with an Irish food product or the outbreak of a major disease in farmed animals. Apart from the impact on Irish consumers, there would be an immediate short-term impact of food producers being excluded from certain markets as well as the more long-term effect of producers taking a long time to recover consumer confidence and market share. The food sector is of vital importance to the Irish economy. Indicators for the sector show that its gross turnover is €26bn, 8.8% of national employment levels and 12.3% of overall merchandise export values.

25. Major Pandemics

Pandemics are unpredictable but recurring events that can cause severe social, economic, and political stress. History shows us that pandemics can cause death and illness on a significant scale and disrupt normal social and economic activity. International exercises and experience indicate that a pandemic has the potential to significantly disrupt economic and social life with the possibility of energy and food supply shortages. The recent outbreak of Ebola and the transmission of the virus outside of Africa is a reminder that as the world becomes more connected, facilitating the spread of viruses, the risks of a pandemic becomes greater.

Energy Security

National Risk Assessment identifies energy risks: 

7. Climate Change & Extreme Weather Events

Apart from the risks posed by climate change itself, there are also potential compliance costs associated with current emission and renewable energy targets to 2020 and the outcome of negotiations on individual EU member state targets for 2030, under the non- Emissions Trading Scheme, due to conclude in 2016. There is also a risk of failure to invest effectively or sufficiently in adaptation measures required to help meet the impact of climate change.

8. Disruption to Energy Supply and Price Shocks

Ireland is completely dependent, economically and socially, on secure energy supplies – particularly on oil for transport and electricity for everyday life. Ireland imports nearly all of its energy needs, as indigenous energy production amounts to only about 14% of the total primary energy supply. Ireland’s situation as an island on the periphery of Europe renders Ireland particularly vulnerable to disruptions to the supply of oil, gas or electricity. Such disruption could arise from natural disaster or geo-political change. Ireland is also vulnerable to sudden price movements in energy prices which could be precipitated by disruptive geo-political shocks or economic trends and would have significant economic, social and competitive impacts.

13. Terrorist incidents and armed conflicts

A breakdown in international peace and security arising from inter-state wars, civil wars, or other armed conflicts could have significant repercussions for Ireland and the EU, including disruptions to energy supplies, transport routes or the environment. Weak or failed states which can be at the centre of, or a product of, such conflicts are frequently a breeding ground for international terrorism and organised crime gangs.

Disconnection from Nature

A major risk in Ireland is that we undervalue our ecosystems leading to degradation of our natural environment. This has and will continue to have an effect on our food safety, human health and well- being, our economy, and all aspects of life in Ireland.

ISDS Investor State Dispute Settlement

As it stands ISDS the Investor State Dispute Settlement is included in TTIP the Transatlantic Trade and Investment Partnership and the Irish government are accepting it. The threat of an investor suing our country if we decide to protect our workers rights or food standards because they are higher than another state is worrying and definitely poses an economic threat. I never got to mention this at the workshop though. More about ISDS and TTIP  I’m using wikipedia as a reference here so you should do your own research on this as it’s a vast subject with the potential for a lot of propaganda. Remember though, investors are probably not in this for the good of humanity.

How can we most effectively prepare for these risks including climate change? (The addition of cc here could indicate that it is not anticipated to be surfacing from participants organically – this needs to be addressed)

Show leadership

First and foremost play a leadership role in relaying the facts about climate change and our need to transition away from fossil fuel. Get national commitment, public participation, show some intention to act and bring everyone on board. This is a planetary issue that will impact greatly on everyone and should not be solely a government agenda.

Build resilience

Our economy needs to focus strongly on creating resilience to outside forces of global change. We accept there are threats so we should have some level of preparation. This should be done at household, community, regional and national level.

In this context our government structures must support sustainable management of our natural resources to strengthen food and energy security and mitigate the impacts of climate change.

Fundamental to this is the need to employ, for example land use grants to promote carbon sequestration, sustainable forestry and farming, flood mitigation and indigenous food production. We need to integrate protection of natural infrastructure into all policy areas.

We need to ensure we can feed ourselves as well as grow an export market. Climate change will affect crops around the globe and we must be able to adapt, possibly even benefit from the situation. Food shortages are probable and mono crops, focused on one product, are inadvisable. Diversifying our farms to include a broad crop base would stimulate the local and national economy, build resilience to food shortages and the inadvisable practice of farming focused on cattle alone.

Protect our natural environment

Investing in the protection of our terrestrial and marine biodiversity is a legal requirement and will help protect public benefits provided by natural infrastructure, will create jobs, reduce imports, save energy, and strengthen the economy for both the long and short term.

A resilient natural infrastructure will ensure the protection of public benefits. The environmental objectives of sectoral policy and reform of the Common Agricultural Policy and review of the Common Fisheries Policy as well as the Marine Strategy Framework Directive will also require us to take the protection of natural systems more seriously.

In this context the budget framework should be designed in order to make best use of European funding sources and allow multiple public benefits to be achieved through sectoral policy.

How should we manage and mitigate risk in designing economic and fiscal policy and in the annual budgetary process?

Incentivise indigenous food and energy supply

Not only does this contribute to an internal market to compliment our exports it cuts down on imports and subsequently carbon emissions. Nurture a diverse and chemical independent food systems as well as broad leaf native forestry and biomass crops.

Build resilience

Increase support for community based resilience building, perhaps through local agenda 21. At the moment there is no onus on a local authority to fund LA21. It doesn’t look good for them not to support it but it is stretching their budgets. Perhaps lower the local authority contribution and increase central government share.

Accountability

Annually – It is important to identify where money is being spent. People now accept climate change as a threat and will be grateful to see money being put towards it. Thinking that every cent collected in taxes is lining the pockets of bailed out bankers is infuriating as is the thought of it propping up the fossil fuel industry. Knowing your taxes are going to mitigate hardship for future generations is much more acceptable.

Support Eco Tourism and Protection of the Natural Environment

Eco Tourism is one of the fastest growing areas at the moment. As people seek to reconnect with nature and the natural world they are purposefully seeking unspoilt and cared for any indigenous, earth respecting culture.

Stop supporting fossil fuel

Divert the fossil fuel portion of the PSO levy to retrofit and energy efficiency measures. Divest from fossil fuel completely – take all of our national funds out of the fossil industry. Stop propping up those that chose to continue to destroy the ecosystem that keeps us alive. Some news on divestment.

Incentivise a shift in the energy utility agenda

Energy utilities are adapting to the home efficiency market. In New York the local utility is incorporating up front capital to homeowners to retrofit their houses. Their energy use is cut by 80% and their lower payments go towards paying for the capital costs. Some utilities could offer rental options where they maintain the infrastructure.

Tax on environmental damage – Polluter pays principal

The Country Specific Recommendations of the European Union for Ireland  support the recommendations made in budget submissions by the Environmental Pillar over the last 6 years.  Ireland needs to broaden its tax base by moving away from taxes on employment and towards taxes on environmental “bads” based on the “Polluters Pays Principle” and removing subsidies for activities that do environmental harm.

This crucial feature of environmental taxes means countries could use them to support either fiscal consolidation or to reduce other taxes. Plastic bag levy funds LA21 projects.

Setting Carbon Tax at a level where it will encourage the move away from fossil fuels is another obvious starting point.

Replacement of the current property charges with a site value tax would deliver a whole range of social and environmental goods whilst charging people on the basis of services provided by society, and encouraging optimum use of available zoned land.


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