Ireland's unreliable emissions reductions could be undone by the EU's CBAM.
During the recent elections in Ireland, the governing parties were quick to take credit for reductions in greenhouse gas emissions achieved under their watch. However, a closer examination reveals that these reductions were driven by transient external circumstances rather than durable policy changes. As a result, the incoming government could soon face rising emissions, spurred by the same external factors that previously masked the lack of genuine climate action. Much will depend on the EU’s Carbon Border Adjustment Mechanism (CBAM), which could soon reverse Ireland’s perceived progress.
A climate laggard's fleeting success
Ireland has long been seen as a climate laggard, with the second-highest per capita emissions in the EU. For 2022, when emissions began to decline, there was cautious optimism that the country had turned a corner. This optimism surged for 2023, when emissions plummeted by 6.8%, dropping below the 1990 baseline for the first time in three decades.
Politicians celebrated this apparent triumph. Not only had emissions fallen, but they had done so while the economy continued to grow – an apparent political victory for Fine Gael (EPP), Fianna Fáil (RE), and the Green Party (Greens), who claimed they had achieved the elusive goal of reducing emissions without disrupting business-as-usual.
Why did emissions fall so rapidly?
A sectoral breakdown of the reductions reveals that the energy sector was responsible for most of the heavy lifting, with a dramatic 21.6% decline in emissions. Other sectors showed much more modest reductions, such as agriculture (down 4.6%), or even increases, such as transport and land use (LULUCF). More than half of the total reduction came from the energy sector.
Setting aside the preferred approaches of the fossil fuel industry, such as hare-brained carbon capture and storage initiatives or using fossil gas as a 'bridging fuel' away from coal and oil, the main way to eliminate emissions from energy is to stop burning fossil fuels. In the electricity sector, there are generally two main strategies: reducing consumption of electricity or increasing the share of renewables to displace fossil fuels. Ireland's recent reductions, however, reflect neither.
Unlike most EU countries, which cut electricity consumption in response to soaring energy prices following Russia's invasion of Ukraine, Ireland's electricity demand actually increased. While households and small businesses reduced consumption due to record-high electricity prices (the most expensive in the EU) large energy users, almost exclusively data centres, drove demand higher.
Renewable energy's share of Ireland's electricity mix rose modestly from 38.6% in 2022 to 40.7% in 2023. However, this increase of 2.1% in renewables was largely outstripped by the increased overall demand for electricity of 2.5% – almost exclusively driven by data centres. As a result, fossil fuels would not have been significantly displaced by these additional renewables.
The main cause: offshoring emissions
If neither reduced consumption nor expanded renewables explains the rapid decline in emissions, what does? The answer lies in electricity imports. In 2023, Ireland's electricity imports surged twelvefold, with early indications suggesting the upward trend has continued in 2024.
Due to the way carbon accounting works, emissions associated with imported electricity are attributed to the exporting country – in this case, Britain. Thus, any fossil fuel-powered electricity imported into Ireland is counted under Britain’s emissions, not Ireland's.
Politically, this offshoring of emissions was convenient for the Irish government, which could claim emissions reductions. However, in the absence of adequate data it is unclear if they really reduced emissions or if fossil fuel burning remained unchanged — merely displaced across the Irish Sea. Despite internal warnings to steer clear of unwarranted self-praise, there was significant political pressure exerted to ensure the government got credit, deservedly or not.
The role of price and policy
The Irish government has attempted to claim credit for the rise in imports by pointing to its longstanding policy of increasing interconnection with Britain. However, this argument is flawed: the interconnectors enabling these imports have been operational for years, well before the surge began in Spring 2023. The true driver lies in the significant price difference between electricity in Britain and Ireland.
British electricity became cheaper in 2023, partly due to differences in carbon pricing. The UK's carbon price fell well below the EU's, with the gap reaching a peak discount of £31 per ton of CO2 in September 2023. This price disparity made British electricity more attractive, contributing to the flood of imports to Ireland.
Carbon leakage and the CBAM
The phenomenon at play here – carbon-intensive industries relocating to jurisdictions with laxer emissions constraints – is known as carbon leakage. The Irish government is well aware of this issue, as it is legally required to consider it when designing climate policies under its own climate law. However, there hasn't been much action evident. For example, there are reports of Irish renewable energy producers being told to "dispatch down" and cease supplying to the grid even when dirty fossil fuel-generated electricity is being imported from Britain.
To counter carbon leakage, the EU is rolling out the Carbon Border Adjustment Mechanism (CBAM). CBAM will impose levies on carbon-intensive imports like electricity, thereby reducing the price advantage of British electricity. Its full implementation by 2026 will likely reduce imports, forcing Ireland to fill the gap with domestic electricity generation, potentially increasing domestic fossil fuel use and emissions.
Aside from climate targets, this could also lead to an increase in electricity prices which are already the highest in the EU and have led to untenable levels of indebtedness to energy suppliers.
Real climate action
Ireland's recent emissions reductions are a fragile achievement built on transient external factors. Without decisive action, the country risks a sharp rebound in emissions. Instead of relying on offshoring, the government must pursue reliable climate action.
We need to reduce demand from large energy users. Data centres, the fastest-growing consumers of electricity, need stricter regulation. Mandating that new data centres be powered entirely by renewable energy at any given time will help curtail their impact. Removing significant tax incentives would also seriously stem the flow of investment.
We also need to accelerate renewable energy deployment. The pace of renewable energy development must outstrip the growth in electricity demand to ensure fossil fuels are displaced, not supplemented.
Without bold action, Ireland's climate targets and credibility are at serious risk. What appears to be a success story today could easily unravel tomorrow.
