This is an extract from the most recent edition of Temperature Check, The Journal’s monthly climate newsletter. To receive Temperature Check to your inbox, sign up in the box at the end of this article.

ONE OF THE most talked about pieces of climate news in the last month was the report from the Climate Change Advisory Council and the Irish Fiscal Advisory Council that said Ireland could be looking at a bill of up to €26 billion if it fails to meet climate targets.

The report confirmed a message that many climate experts have been sharing: it’s better and cheaper for Ireland to invest in climate action now than hold back and face the consequences later.

Something worth noting is that much of the discussion that followed talked about Ireland facing ‘fines’ – but actually, the financial ramifications outlined in the report are not fines, strictly speaking.

If you’ve been wondering where exactly that money would be going or how the study arrived at the figures it estimates, here’s the story.

Ireland, along with other EU member states, is signed up to various pieces of EU legislation and targets on climate action. These include the Renewable Energy Directive, the Land Use, Land Use Change and Forestry Regulation and the Effort Sharing Regulation (all of which Ireland is “not on track” to comply with).

The most significant risk for Ireland, the report said, was the cost of missing emissions targets covered under the Effort Sharing Regulation, which includes domestic transport, buildings, small industry, waste, and agriculture.

“Ireland is already near the bottom of the league when it comes to emissions reductions covered by this regulation,” the report said.

If Ireland does not meet its commitments in the ESR sectors, it will need to purchase ‘allocations’ of emissions from other member states that do.

It’s the purchase of those allocations that could carry a hefty cost for Ireland – as opposed to fines per se.

Purchasing emission allocations could be expensive and difficult because only a few member states are likely to overperform and have allocations left over to sell, creating a competitive market among the countries that are trying to buy them.

“The shortage of emissions allocations available for purchase could result in a bidding war,” the report detailed.

If the allocations are in short supply, what could happen if Ireland was potentially unable to buy any?

“This question is difficult to answer,” the report outlined.

“It could potentially result in substantial penalties or legal repercussions. The legislation is currently not clear on this,” is said, adding that consequences for missing targets and not having the necessary allowances are “not explicitly defined in cash terms”.

“The European Commission could opt to take costly action, including infringement proceedings, against member states. But there are no previous examples of countries missing targets to work off.”

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A graph in the joint report showing Ireland's likely excessive emissions Climate Change Advisory Council / Irish Fiscal Advisory Council. Climate Change Advisory Council / Irish Fiscal Advisory Council. / Irish Fiscal Advisory Council.

The report looked at the potential costs that Ireland could face depending on how exactly we perform on climate action in the coming years and by what margin we miss our targets, which would determine the amount of allowances we would need to try to purchase.

With the climate policies, regulations, and incentives that Ireland has already implemented or adopted, the country is likely to significantly miss a range of climate targets.

The potential upper cost estimate of the resulting payments, according to the report, is €26.4 billion. It also gave a lower cost estimate – effectively the ‘best case’ outcome under this scenario – of €7.5 billion.

With additional climate action beyond the measures already in place, the upper cost estimate falls to €11.9 billion and the lower cost estimate falls to €3.4 billion.

The wide range of potential costs that Ireland could face due to missed targets is driven by the fact that, if we overshoot our emissions and have to purchase allocations, the cost is dependent on what other member states ultimately decide to charge.

“It is better to make the investments into Irish households, communities and businesses now rather than paying significant compliance costs in the years ahead,” said Climate Change Advisory Council chair Marie Donnelly.