From top: The cost of retrofitting our building stock to low carbon status is estimated at €35 billion; Michael Taft
Going by Budget 2020, you wouldn’t think there was a climate emergency.
There was bits-and-pieces funding for greenways and urban cycling, electric vehicle infrastructure and purchase, installation of solar panels, emerging ocean technologies and uptake of alternative fuels such as biomass; a 14 percent increase for the Department of Transport, Tourism and Sport, and a Just Transition Fund for the Midlands along with a Just Transition ‘Commissioner’.
All in all, little enough funding and even less urgency.
The Government’s big ambitions for retrofitting the building stock in their climate change strategy don’t seem to have been matched by the budget. Yes, there will be an increase to the Warmer Homes Schemes – to €53 million – but that is a means-tested scheme for those on low incomes.
The climate change strategy envisages 500,000 building retrofits to reach a B2 BER, along with the installation of 400,000 heat pumps.
According to Social Justice Ireland, the Sustainable Energy Authority estimates the cost of moving our building stock to low carbon status at €35 billion. IBEC has a price tag of €25 billion. Whatever the sums, it will be significant.
We will also need, as IBEC puts it, a systematic upskilling programme to develop nationwide expertise and know-how in new low-carbon technologies, energy efficient design, building services and retrofitting. We can’t assume that, if the Government provides the investment, the retrofits will follow.
Most of all, we need affordability. Under the Deep Retrofit Scheme – which was launched, closed down and then slightly re-opened – applicants have to pay 50 percent or more of the total costs.
This is beyond most households’ ability (especially given that 42 percent can’t afford an unexpected financial expense). In effect, such grants constitute regressive subsidies to higher income households.
This is one of many acid tests of Just Transition. If people are locked out of the retrofitting programme or can only participate at considerable cost, then not only will it fail to achieve its climate objective; it will violate social equity.
There is a commitment to develop a retrofitting plan to ensure that the grant schemes, new finance models and the delivery system are effectively integrated. This plan is to be published by the autumn of next year.
A number of proposals have been put forward: to allow repayments through energy bills or through increased property taxes. Here is one more suggestion.
Accessible and Affordable
The first principle is that retrofitting – to the maximum possible depth (deep over shallow retrofitting) – should be free upfront. Retrofitting brings wider social benefits; in particular, the reduction in carbon consumption.
It also brings economic benefits such as the reduction of fossil-fuel reliance and imports. The benefits are spread well beyond the fiscal and environmental benefit to the household.
The financing model could be a variant on Fine Gael’s proposed National Recovery Wholesale Bank:
‘Fine Gael proposes that a “National Recovery Wholesale Bank (NRWB)” will be created. The NRWB will provide funds to the utilities to allow them to start retrofitting the 1.2 million houses with poor energy ratings.
The NRWB will provide the up-front funds to the power
utility companies, who will then subcontract the work to construction companies.
They will, in turn, install insulation and other energy efficient fixtures in applicant houses.
The money invested in the retrofit programme will be recouped through “Pay as You Save” schemes, which will allow consumers to pay back the costs of the retrofit over a number of years out of the fuel savings generated.’
While the operation through utility companies may not be optimal, the principle of free up-front retrofitting is recognised.
The second principle is that repayments should be affordable. Ideally, they could be linked to ability to pay. This may or may not be achieved through repayments based on energy bill reductions.
It could be achieved through a small levy on income, to be collected by the Revenue Commissioners or Department of Social Protection on an agency basis.
The repayment period shouldn’t be an issue. The Bank would have a lien on the property and the balance could be cleared on the sale or transfer of the house.
The state could still step in with grants, but now they would be open to everyone. Further, any house that is sold or transferred would be required to have a deep retrofit executed before the sale/ transfer is legally completed. In addition, this Bank could similarly fund retrofitting of rental accommodation and commercial / industrial premises.
These principles – accessibility and affordability – can be extended to other climate repair initiatives. There could be a programme of providing similar loans based on ability to pay to purchasers of electric vehicles.
The loan could be based on the cost difference between purchasing a regular car (petrol or diesel) and an electric vehicle, and rolled out in rural areas where car-reliance is highest.
Such initiatives could also play a role in ensuring best labour and consumer practices. Only construction companies that apply the highest level of labour protection would be allowed to participate in the scheme, while there would be a bank-guarantee for the work done with bonds posted by installers.
If Just Transition is to have any substance we will need to ensure that everyone is enabled to participate in climate repair initiatives. This is only one example. The principles of accessibility and affordability can be extended throughout the range of activities required by decarbonisation.
But this will require new programmes, financial innovation and a little bit of imagination. Unfortunately, all these were absent in Budget 2020.
Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.