The fifth set of witnesses to address the committee today is Mr. Neil Walker, head of energy and environment policy, Irish Business and Employers Confederation, IBEC, and Ms Jill Murray, Bord Gáis Energy. They are very welcome to the committee.

I wish to advise the witnesses that they are protected by absolute privilege in respect of their evidence to the committee. However, if a witness is directed by the committee to cease giving evidence in regard to a particular matter and continues to do so, the witness is entitled thereafter only to a qualified privilege in respect of his evidence. Witnesses are directed to restrict their evidence to the subject matter of these proceedings and to respect parliamentary practice by not criticising or making charges against any person, persons or entity. Witnesses are asked to read the document circulated to them about privilege. I remind them not to read out their opening statements. These have already been distributed to members and will be taken as read. They have a maximum of five minutes to deliver their opening statements and when they reach this time I will inform them. I call on Mr. Walker to address the committee.

Did the Chairman say we are not to read our opening statements?

Yes. We can take that as being read but Mr. Walker can offer views around the statement. If he is happier reading it out then he may do so.

If everyone has read the opening statement there is no point. Would the people in the audience be aware of its contents?

Mr. Walker can summarise the opening statement if he wishes. The opening statement has been submitted. That has been the general rule all day but if he would like to read it out then he should please do so.

Yes indeed. I thank the Chairman and the committee for the opportunity to answer questions on our submission. I would like to introduce my two colleagues, Ms. Jill Murray from Bord Gais Energy and Ms Audrey O’Shea from Glanbia whom the committee met this morning. There are particular circumstances for her second appearance. We apologise if we have breached any protocol. I explained to the clerk the particular circumstances. It is my intention to handle most of the questions. Unless there are questions specifically directed to my two colleagues I will attempt to answer them.

The committee is aware that I head up IBEC's energy and environment policy unit. I have been doing that for three years. I previously worked for the Sustainable Energy Authority and prior to that in industry. As part of my policy brief I administrate several policy committees including an energy policy committee and an environment policy committee and our climate change working group runs across both those committees. We try to represent the broad common interests of all sectors of industry because we have several thousand members in different sectors. Whereas individual sectors may have particular interests we are trying to find the common ground.

I thank Mr. Walker and his team for taking the trouble to come in. In his opening statement he mentioned that this Bill is an improvement on previous attempts at legislation which would have worked against, rather than alongside, EU policy. Could Mr. Walker explain how previous Bills may have worked against, rather than alongside, EU policy?

This morning we heard the other employers' body, Irish Corporate Leaders on Climate Change. Those witnesses said that they can see the need to use the opportunities to provide certainty in respect of the legislation, clear markers and a clear direction, clear five year targets, clear 2050 targets to give people and investors certainty. Mr. Walker's statement seems to be at variance with that. Why is that so? The future will be very different from the present. Would Mr. Walker agree that if we do not change course now we will lead ourselves into a cul de sac, instead of going down a different road where we use the new realities to develop the opportunities to move towards a more carbon-neutral future?

That is a very good question. There have been four or five attempts at climate legislation in recent years. I am familiar with all of them, and with two authors of the legislation who are here today. I do not intend to imply any criticism of any person but as a point of principle it is important when designing national legislation that it works in harmony with the pre-existing European legislation. The primary criticism that we made of the last government attempt at legislation is that it effectively ignored the existing EU policy and would have directed mitigation efforts into areas where there would have been no environmental benefits, specifically the emissions trading sector where the absolute cap is already determined so the money would not have been spent on meeting national obligations but simply on driving down the price of EU allowances. This has been debated at length in various fora. There is very little debate about it now. It is imperative that national policies reinforce EU policies in the same way that EU policies have to reinforce the UNFCCC framework.

There is no room for national solo runs.

I thank Mr. Walker for his submission. I am director of the Abbey Theatre, which is a member of IBEC, although our representative is not on the energy committee. I had better outline that in case some wily journalist reveals that.

Mr. Walker states clearly in his submission: "For the avoidance of doubt, such a body must not be modelled on the UK's committee on climate change whose relationship with the Department of Energy and Climate Change and with the UK Treasury has become increasingly fractious and ineffective over recent years". He later states: "We would also disagree with recent proposals that responsibility for climate policy should be transferred into the Department of Taoiseach". They are two Doomsday visions for IBEC about what a committee might look like. Will Mr. Walker outline his view of what that horror might be?

I did not use the word "horror".

I refer to the perceived potential conflict between our current model of economic growth, which also includes the Food Harvest 2020 strategy, and the notion that we must reach targets? IBEC opposes the insertion of targets in the Bill but we are considering long-term targets.

Could the Senator refer me to the part of my submission that says that?

I am making an inference. This is not a criticism of IBEC. There is a potential conflict between our current economic growth model, which also includes the Food Harvest 2020 strategy, and the insertion of targets in the Bill. Does Mr. Walker see that as a conflict?

Last week, Dr. Brian Ó Gallachóir of UCC made a presentation to the committee on low carbon emissions. He had a particular view on the electrification of heat. IBEC refers to the increasing cost of electricity in its submission. What is the body's view of the electrification of heat between now and 2020?

In addressing the second question, I will be able to address one of the questions I neglected to respond to earlier from Deputy Stanley. There are tremendous green growth opportunities in the economy. Provided we get the policy right, there is a chance to make the economy much more sustainable, have a lower carbon footprint and not damage our economic prospects.

What is IBEC's view on the policy?

I am not here to answer that question because the Bill will not set out what are those policies. There will be a committee of experts. I happen to have a background in this and I have a great interest but if the Senator gets me started, we will be here for the rest of the afternoon and he will not get any more questions answered. I have done a great deal of work on what technologies are available. It is one thing to identify a technology with potential but it is another to design an efficient policy that gets that implemented. For example, work done by McKinsey suggests many energy efficiency projects have a negative cost. Why are they not happening? If one cannot get things to happen of their own accord when they are a negative cost, how much more is policy needed to make sure things happen that have a positive cost and are done in such a way that they will create opportunities for the business community to deliver domestically rather than substituting a dependence on fossil imports for a dependence on technology imports?

Should responsibility for this, therefore, transfer to the Department of Communications, Energy and Natural Resources from the Department of the Environment, Community and Local Government?

Climate cuts across all Departments. That is no argument for moving responsibility for it to the Department of the Taoiseach because that is not a spending Department. It holds the ring between all the other Departments. Clearly, there is a Cabinet decision-making process and a Cabinet sub-committee, which is advised by experts, but no country makes the Head of State personally responsible for delivering climate policy. The President of the European Commission, for example, does not have responsibility for it; the Commission has a directorate. Britain has the Department of Energy and Climate Change, not David Cameron. From that viewpoint, while I can see the argument for having greater accountability and it would be great to haul the Taoiseach in during Question Time every week and ask him what he has done for the climate this week, I am not sure that would have any positive real effect on achieving what we want.

What is the ideal model of accountability for delivering policy if the UK's is not?

The UK has been proactive and we can learn a great deal from them, including from the mistakes they have made.

What are those lessons?

The UK is unusual in having such advanced climate legislation. It is the exception rather than the norm. Every member state has transposed EU legislation that would have the impact of promoting renewables, energy efficiency, building standards, sustainable transport or reducing carbon emissions but few have introduced a climate Bill, which has targets that do not specifically relate to what has been negotiated in Brussels. We have an effort sharing agreement on renewables, energy efficiency and climate targets for the non-emissions trading sector. The way those targets were reached was through modelling similar to Dr. Brian Ó'Gallachóir's, except that he reckons they got the numbers wrong. Although there was meant to be an equal sharing of the burden, the numbers for Ireland are much higher because they did not take proper account of agriculture, but then Ireland's target was adjusted upwards as part of social cohesion. Instead of us getting 16%, we got 20% and we were meant to carry more of the burden than other less wealthy EU states. They thought we were rich back in 2006 and we would help them. The question is whether we would help them by going the extra mile doing domestic abatement at ever-increasing cost or whether we would have financial transfers to cause abatement to be done at a lower cost, thereby helping economic development in poorer countries. That is different from buying dubious credits from Third World countries where there have been issues about how real they are. This is within the EU and the Commission wants us to promote social cohesion. Target setting is a complex process, which is negotiated in Brussels.

The UK does many things well but it has determined its climate targets without adequate reference to the EU policy framework and one of the unintended consequences, for example, of the carbon price law is to depress the price of carbon in the European market. It has targets up to 2050 but if the Senator Googles it, he will find in two minutes that there has been a series of public spats between the committee on climate change and the Government. Perhaps he will say that is holding the government to account but has it been constructive? I invite him to form his own view.

Does IBEC broadly agree with the composition of the expert advisory group under the Department of the Environment, Community and Local Government under the draft heads?

The administration of the expert group will be provided by the Environmental Protection Agency, EPA, and that is not a bad thing because the agency has done much of the leg work.

The five ex officio members of the committee are all very busy people. I do not know who the other three or four people will be and I do not have a view on that.

The difference between the corporate leaders' approach this morning and IBEC's approach is stark. They were keen on having certainty and referred to the UK approach as being positive in giving certainty for people, for example, in the energy sector.

Mr. Walker said we should not do solo runs here. Would he be in favour of inserting into the Bill the targets to which we have already more or less subscribed? The main emphasis in the IBEC submission appears to be on avoiding measures that increase the cost burden on employers. On the other side of that, has it quantified the damage-type issues, such as increased insurance costs and investment in water infrastructure? Would the cost of inaction be more than the cost of action?

This morning, the corporate leaders pointed to the need for a broader vision that would cascade down into each of the sectors. Would Mr. Walker agree with that approach? The decision on where responsibility is placed at Government level ties into that. He has already said that the Department of the Taoiseach should not have the responsibility. That broad vision seems to be a very sensible approach. We would have to come back to how it might be defined. Does Mr. Walker believe the science on the targets up to 2020?

Are you asking me if I am a climate change sceptic?

No. The emphasis of the submission was that it should not apply more of a cost burden on industry. It is difficult to see how we can meet the targets without having costs in the short term. If the proper investment is made, there may be a greater cumulative return in the longer term. We need to plan for 2020, 2030 and 2050. Is IBEC working towards that? How can we meet those targets without incurring a cost at this stage?

That is understood. There are five questions and I may not respond to them in the order asked. First, the Deputy spoke about damage, which is really the cost of adaptation. Most of the pollution is being done in the developed world and most of the damage is being done in the Third World. That is an issue of climate justice, on which I feel very strongly. Within Europe there are issues relating to flooding, coastal defence, etc. However, I do not claim to have any expertise in the mitigation costs of that. Globally, the Stern review has shown that the cost of mitigation should be cheaper than the cost of adaptation, but I cannot say whether that also pertains to one EU member state.

I agree on the need for a vision, which is why it makes sense to have a national roadmap. However, it must also adhere to European policy and cannot be a stand-alone national vision. On the issue of whether central roadmaps should inform the national roadmap, it will be a two-way flow.

Do I believe that the target for Ireland was scientifically reached? As I have previously outlined, the European Commission runs a model called PRIMES which is run by the University of Athens. It is similar to the TIMES model which Dr. Ó Gallachóir runs. A model is only as good as the numbers on which it runs and it is an engineering technical model. It is an optimisation model in Dr. Ó Gallachóir's case and a simulation model in the Commission's case. Having come up with a solution that was supposedly equimarginal - that is efficient - because nobody was asked to be able to do something at a higher marginal cost than everybody else, they then adjusted the targets for purposes of social cohesion. The target we have is not purely the result of science.

At a global level a scientific reduction is required because the environment only cares about global emissions. High-level international politics at the UN then decides the share that is being carried by the EU. Negotiations in Brussels then determine the share of individual member states and that is partly on economics and partly on social grounds. We ended up with the toughest target by far, partly because the modelling is questionable and partly because we were perceived to be a rich country - we got landed with our target based on 2006 GDP.

We need targets but we have loads of targets. Between now and 2020 for each year there is a trajectory for the ETS which is EU-wide. There is a trajectory for the non-ETS sector. There is a requirement to move towards the use of 10% of renewable sources of energy in transport. That is qualified by a target related to indirect land use change. There is a target for overall renewable sources of energy and there is a target for annual improvements in energy efficiency. That makes 48 targets.

We could put a reference to targets in the Bill, which we suggested to the former Minister, Mr. Gormley, more than two years ago. In order to get broad support for his Bill, all he had to do was to say that the purpose of the Bill was to enable Ireland to meet, at a minimum, its legally binding obligations under the EU climate and energy legislation.

However, this is not purely about energy policy. The climate-change working group covers not just energy policy, but also environment policy so it feeds into two broad policy committees. I believe every member of the Irish Corporate Leaders is a member of IBEC and most of them are represented on those policy committees. If there really was a stark disagreement between the two positions, it would have surfaced in our discussions.

I believe Mr. Walker has covered most of the questions. I was interested to hear his view that responsibility should not lie in the Department of the Taoiseach, which is probably similar to mine.

On head 8, IBEC's submission refers to the need to provide more detail. It also states that it should not be modelled on the UK's committee on climate change. I ask Mr. Walker to outline the weakness in head 8. While dealing with head 8, does Mr. Walker believe the national should come before the sectoral roadmap or should they run in parallel?

Perhaps I might quote Dr. Rory O'Donnell of NESC who said that policy is a loop and not a line. If one buys into that, there needs to be constant two-way communication. It may be that there are several iterations. Nobody writes a plan that will be good for 40 years - it will need to change. To the extent that there is a national target and a framework, it is then necessary to ask each of the sectors what it is possible to do, what it would cost and what policy design is required to do it. Some of them may need more encouragement because they have not been at it as long. The individual plans are then added together and reviewed. That is what the European Commission does with renewable energy and energy-efficiency action plans to see whether the national plans in total add up to the overall target.

There is likely to be a shortfall, for the simple reason the European Commission intended that in Ireland's case there would be a shortfall. This is why we were given an extra 4% in the target, so we would have a choice between more expensive domestic measures or funding work elsewhere in the EU.

It would be a matter for the national roadmap to state how big the gap would be. There almost certainly will be a gap, even if the economy stays in the doldrums. Effectively our reduction is not 20%; it is probably more than 30% when one considers the sheer difficulty of abating emissions from soil processes and enteric fermentation in the agriculture sector. Even if one could come up with a novel technology, such as vaccinating cows to stop them burping or particular chemical inhibitors which would stop soil bugs from decomposing matter into nitrous oxide, the UN accounting system would not recognise them as savings. It is likely there will be some use of flexibility instruments in the EU and this is not a bad thing; it is what the Commission wants us to do. It will not be for an individual sector to state it can do nothing so it will meet its share of the burden through the purchase of instruments. This would be an issue for the central road map.

With regard to head 12 and the potential cost burdens to Irish employers, how could the language be altered to better regulate it?

If the policy is right there will be opportunities. There are already costs associated with the policies in place but they are being borne. Some of them are very visible, such as the carbon tax and EU allowances, but there are also costs which are less obvious in terms of how the energy system is required to operate. We have not been complaining and we have been very progressive. It is fair enough to meet a target in a way which is efficient but there is nothing to be gained from doing it in a way which is inefficient. How would this help anybody? It would just mean there was less money over to do the work needed.

Mr. Walker mentioned the pitfalls discussed by a UK committee on climate change and he also covered this when answering questions. Are there any other obvious pitfalls for which we should watch?

I can see an enhanced role for the expert advisory group. Whether this would extend to supervision is not clear. It is quite feasible there should be some form of supervisory body, not necessarily the Taoiseach or an Oireachtas joint committee because it could be diluted across several such committees. One could envisage something along the lines proposed in the final report from the National Economic and Social Council, NESC. We do not state this would be the best way to do it, but it would be no harm to consider whether there would be a role for such a supervisory body. We would see it as complementary to the role of the expert advisory group. The expert advisers would advise on how to design policies and implement them in a way whereby technologies are adopted early and cost effectively, but somebody must examine whether it all adds up and if not what more needs to be done. This is not necessarily a role for the heads of the EPA and SEI. It might be, but they all have day jobs also.

What Mr. Walker proposes is an expert embedded group similar to the Fiscal Advisory Council. The NESC was going in that direction in one report.

One could draw parallels with the Fiscal Advisory Council. I am not qualified to state whether the Fiscal Advisory Council carries much clout. I could not answer this question.

Most of the questions I wanted to ask have been answered. A major issue with regard to sustainable development and renewable and sustainable energy is certainty in the market. Mr. Walker is against the UK model. The UK position on the single 2030 target emissions reduction will help reassure investors the Government understands the need for certainty and flexibility if they are to invest in new low-carbon technologies. One of the main themes at a conference held in Dublin Castle last month, which I helped organise, was that investors need certainty. One way of achieving certainty is knowing what a government will do. What does Mr. Walker recommend to achieve certainty in investment in renewable energy? It is all right to have policy, but if we do not have people to implement this policy we will go nowhere. We must make it happen; there is no point in writing a document if we have nothing at the end of it.

The Senator has asked a valid question and I will do my best to answer it but I may call upon my colleague Ms Murray who knows much more than I do about this.

Some measures we could implement could have negative costs. I am interested to hear about this because we do not have money. Offshore wind energy costs much more than onshore. It is more productive at sea but we do not have it. I would be delighted to hear about measures with negative costs so we could recommend them.

With regard to certainty, unless we know what the price of carbon will be for the next ten years nobody will build a wind farm. If we look at what happened during the pilot phase of the emissions trading scheme, which was between 2005 and 2007, the price of carbon moved from approximately €20 to approximately 20 cent per tonne. During this period investment in wind in Ireland accelerated because the revenue received by a wind developer does not depend hugely on the price of carbon. It can help, but what is more important is the wholesale price of electricity, which also depends on fuel costs. There is also the safety net of a renewable feed-in tariff which means even if a recession hits, which it did in 2009, and the price of gas in Europe were to fall by half, which it did, and therefore the pool price of electricity falls by 25% to 30%, the wind farm is held whole and has a hedge against energy prices falling too low. Anything above this provides the icing on the cake. There are also other issues with regard to certainty on wind farms, such as the weather and planning permission. The gate process was first come, first served, so many people are sitting on connection offers but do not have planning permission. It is a very complex area.

I will speak briefly about European policy. This week, the European Parliament passed a vote on backloading and the price of EU allowances has shot up from €4.50 to €4.75. It has not had a huge effect yet, but if it is followed by further measures it could increase the price of carbon. The question is whether this will have an impact on the build-out of renewables. Other countries have gone for much more expensive technologies, particularly on the Continent. Some countries have tried to create certainty. In one instance solar photovoltaic energy was being developed at a multiple of the cost of onshore wind but there was no certainty because the government in question then realised how expensive it was and pulled the plug. It has been very damaging to investor confidence.

The way the Department has proceeded has been very good. It has thought things through carefully and is focused on technology, which is where we have an advantage. Having the refit scheme as a safety net is a reasonably cost-effective way of promoting onshore wind. If the price of energy continues to increase the refit will not cost anything because there will be no need for a public service obligation. It will be above the safety net level. We have policies in place which, regardless of the price of energy, of which carbon is only a part, there is sufficient certainty to promote renewables. There is a queue around the block to build onshore wind.

From our point of view, in terms of investment in renewable energy, what we want to know is where we are going. This Bill will be helpful in that it will provide a co-ordinated approach, which means each sector will know where it is going, at least for the duration of the roadmaps, be they five or seven years. A positive development for us in terms of renewable development is that the Department has stuck to its guns. Europe has set a target and Irish policy makers have developed the policy to achieve those targets and have stuck to them. In other countries, Governments have pulled back and changed their targets, which kills investment. It gives investors comfort that the Irish Government is pro-investment in renewables and renewable policy.

The uncertainty at the moment is around where we are going next and what happens post-2020. By providing a framework whereby we are planning in advance on a five or seven years basis, we will know well enough in advance where the Government is going and what policy will be. This provides for certainty and stability to investors and reduces the costs of investment. One of the key questions we are asked by financiers these days is what is Ireland's policy on renewables. We have been able to show that Irish Government policy has been stable, which has proven very helpful for us.

In terms of the Bill, we believe it will provide the framework to give us the certainty so that we can invest and that this, in turn, should reduce the cost of those investments.

Negative news always receives the most coverage in the media and so protestors outside a renewable energy conference and so on always receive more coverage than does the conference. What would the witnesses do to educate the mass public? In other words, in terms of investment in renewable energy, how do they bring people along with them?

A large part of the focus is on behavioural change and education change to bring society to where we are trying to go. To date, the focus has been on a few sectors of society. This framework will, perhaps, help in terms of education. How one goes about it is a good question. While I cannot answer that question, it is core to this working from an energy efficiency and renewable viewpoint.

I would like to think that we will be the last generation who will have bad teeth and do not care about the climate.

The work being done by the local authorities and education awareness officers in conjunction with An Taisce through the schools green flag programme is an excellent way forward. There are many new schemes in the area of health, waste, energy, climate change and water. The younger generation will teach the older one.

I thank Mr. Walker, Ms Murray and Ms O'Shea for their interesting exchange of views.