EU and International Climate Action

Reflecting our commitment to addressing this global challenge, Ireland is a party to the United Nations Framework Convention on Climate Change (UNFCCC), and the Paris Agreement, which together provide the international legal framework for addressing climate change. As a member of the EU, Ireland also participates in the EU Emissions Trading System (EU ETS), an essential tool for reducing greenhouse gas emissions. Ireland also committed to reaching national targets for reducing our greenhouse gas emissions by 2020 and 2030, under the EU Effort Sharing Decision and EU Effort Sharing Regulation.

The United Nations Framework Convention on Climate Change (UNFCCC) was adopted in 1992 as part of a global response to the problem of climate change. It provides a framework to combat climate change by reducing greenhouse gas (GHG) emissions and building capacity to adapt to its negative impacts. Under the Convention, governments:

• Gather and share information on GHG emissions, national policies and best practices
• Launch national strategies for addressing GHG emissions and adapting to expected impacts, including the provision of financial and technological support to developing countries
• Cooperate in preparing for adaptation to the impacts of climate change

Ireland is a Party to the UNFCCC, reports directly to the Convention in relation to emissions and participates in the UNFCCC formal meetings twice a year, and annually at the Conference of the Parties (COP) through the EU.

Agreed in Paris on 12 December 2015, the Paris Agreement is a legally binding, global agreement on climate change which aims to strengthen the ability of countries to deal with the impacts of climate change. It sets out a long-term goal to limit global warming to below 2°C above pre-industrial levels, and to pursue efforts to limit the temperature increase to 1.5°C. The Agreement requires each Party to prepare and communicate a Nationally Determined Contribution (NDC) that it intends to achieve. NDCs are submitted every five years to the UNFCCC. Ireland will contribute to the Agreement through the NDC tabled by the EU on behalf of Member States in 2016, which commits to a 40% reduction in EU-wide emissions by 2030 compared to 1990. All Parties are required to submit new or updated NDCs in 2020.

The EU Emissions Trading System (EU ETS) is a cornerstone of the EU's policy to combat climate change and the key tool for reducing GHG emissions from power-generation and industry cost-effectively. The EU ETS covers more than 11,000 power stations and industrial plants (stationary installations) in 31 countries, as well as airlines that operate within the EU. The ETS covers about 45% of EU emissions, but only about 26% of total emissions in Ireland.

The EU ETS works on the 'cap and trade' principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, companies receive or buy emission allowances, which they can trade with one another as needed. Individual installations must report their CO2 emissions each year and surrender sufficient allowances to cover their emissions. If their available allowances are exceeded, an installation must purchase allowances. On the other hand, if an installation has succeeded in reducing its emissions, it can sell any surplus allowances remaining.

The EU ETS is designed to bring about reductions in emissions at least cost, and to date has played an increasingly important role in assisting European industry implement the type of reductions envisaged within the EU’s target of at least an overall 20% reduction of GHG emissions across the EU by 2020. The scheme came into being in 2005, with Phase I introduced as a three-year pilot which ran until 2007. Phase II operated between 2008 and 2012, and Phase III is currently running from 2013 until 2020. Under Phase IV, which will run from 2021-2030, the sectors covered by EU ETS must reduce their emissions by 43% by 2030 compared to 2005 levels. Further changes in the design of the system will include a tighter cap on emissions, a strengthening of the mechanism to remove the surplus of allowances from the market, and changes to reduce the administrative burden on small industries.

EU ETS is run on a day to day basis in Ireland by the Environmental Protection Agency (EPA), and information on the operation of the system in Ireland is available on the ETS section of the EPA website. Further information on the EU ETS can be found on the European Commission website.

Background

In May 2023, the EU adopted Directive 2023/959, which strengthens rules in relation to its existing EU Emissions Trading System (ETS I). The Directive also made provision for the introduction of a separate but adjacent system for the buildings, road transport and additional (mainly small industry) sectors (ETS II). The Directive was transposed by way of Statutory Instrument No 470 of 2024 which was signed by the Minister for the Environment, Climate and Communications on 19 September 2024. The text of the Statutory Instrument is available on the electronic Irish Statute Book website.

The point of regulation for ETS II will be upstream from the final consumer, that is, it will not require individual householders or road transport users to take part directly.

The competent authority for the ETS II system in Ireland is the Environmental Protection Agency (EPA). Further background to the ETS II system, the sectors and fuels covered, and the permitting requirements for entities covered by the system is available on the EPA website.

The relationship between ETS II and Ireland’s carbon tax

In line with the provisions of Article 30e(3) of Directive 2023/959, Ireland, through the Department of the Environment, Climate and Communications, notified the European Commission in December 2023 of its application for a derogation under Article 30(e)3 of Directive 2023/959, to exempt ETS II Regulated Entities from the obligation to surrender emissions allowances for the years 2027-2030.

The relevant provisions of the Directive provide that a Member State with a carbon tax rate equivalent or higher than the average ETS II auction price, may exempt regulated entities from the obligation to surrender ETS II allowances between 2027 and 2030, subject to annual review by the European Commission.

All other obligations of the directive such as monitoring and reporting of emissions will apply to Ireland, and compliance with those obligations is also necessary to obtain the derogation.

Work is ongoing between Ireland and the European Commission on the steps necessary to ensure that the derogation will be in place in advance of the obligation period from 2027 to 2030.

Future review of the ETS II system

The legislative provisions of ETS II are set out in Chapter IVa of Directive (EU) 2023/959. These provisions require the European Commission to report to the European Parliament and to the Council by the end of 2027 on the implementation of the ETS II system with regard to its effectiveness, administration and practical application. This report should include legislative proposals to amend the legislation if this is considered necessary. A separate provision requires the European Commission, by 31 October 2031, to assess the feasibility of integrating the ETS I and ETS II systems.

The EU Effort Sharing Decision (ESD) established binding annual GHG emission targets for Member States for the period 2013-2020. These targets concern emissions from most sectors not included in the EU Emissions Trading System (EU ETS) such as transport, buildings, agriculture and waste. For the year 2020 itself, the target set for Ireland is that emissions should be 20% below their level in 2005. This compares with an EU average reduction of 10%. This will be Ireland’s contribution to the overall EU objective to reduce its emissions by 20% by 2020 compared to 1990 levels. Ireland’s target is jointly the most demanding 2020 target allocated to EU Member States under this Decision, which is shared only with Denmark and Luxembourg.

The EPA produces emission projections on an annual basis for all sectors of the economy. According to the latest projections produced by the EPA (June 2019), projected emissions for 2020 indicate that Ireland’s emissions could be in the range of 5-6% below 2005 levels, representing a significant shortfall in terms of reaching the 20% reduction in 2020. This reflects both our reduced investment capacity over the period of the economic downturn, as well as the fact that the target itself was misinformed and not consistent with what was achievable on an EU wide cost-effective basis.

Ireland’s obligations under the Effort Sharing Decision will finish in 2020, at which point it will be followed up by the EU Effort Sharing Regulation (ESR). This Regulation sets out binding annual GHG emission targets for Member States for the period 2021–2030 inclusive. Under the ESR, targets for Member States are based on GDP per capita and the cost-effectiveness of domestic emissions reductions within individual Member States. The final agreement sets a target of 30% reduction in GHG emissions (compared to 2005 levels) by 2030 for Ireland. This will be Ireland’s contribution to the overall EU objective to reduce its emissions by 40% by 2030 compared to 1990 levels.

The Climate Action Plan provides a detailed framework identifying how Ireland will achieve its 2030 targets and puts Ireland on a trajectory which is consistent with achieving net zero emissions by 2050.

On 3 July 2020 the European Commission - DG Clima launched the first call for large scale projects under the EU Innovation Fund which is expected to invest €10 billion up to 2030, in driving clean, low carbon and innovative technologies towards the market. The Innovation Fund (IF) will be a key source to deliver on the European Union’s (EU) commitments to reducing GHG emissions under the Paris Agreement, and to support the EU's longer term vision of a climate neutral Europe by 2050. The first call for small scale projects (<€7.5 million) is due by the end of 2020 or early 2021. Regular calls are expected until 2030.

Read more on the Innovation Fund