Blog: Tom Ferris on Climate Action Plan and the Commercial Semi-State Sector

The Climate Action Plan 2021, published in November 2021, has set a target of a 51% reduction in overall greenhouse gas emissions by 2030 and a target of net-zero emissions by no later than 2050. Every economic sector is expected to make its contribution. The commercial semi-State sector is no exception. Last month, the Minister for the Environment, Climate and Communications, Eamon Ryan TD, secured Government approval for a new Climate Action Framework for the commercial semi-State sector (the Framework), which should ensure that the companies in this sector can play its lead role in Ireland’s transition to a carbon neutral economy and society. The New Economy and Recovery Authority (NewERA) will oversee the Framework. This Authority already provides financial and commercial advice to Government Ministers and Departments in relation to State companies across a range of sectors https://www.ntma.ie/business-areas/newera

What is the scope of the Framework?

The Framework will apply to every commercial semi-State company and comprises of a series of five commitments as follows:

· Governance of climate action objectives

· Emissions measurement and reduction target

· Emissions valuation in investment appraisal

· Circular economy and green procurement

· Climate-related disclosures

The new framework will impact not only on the commercial semi-State companies but also on their subsidiaries. Box 1 list the names of the twenty-two companies.

Box 1: Twenty-two Commercial semi-State Companies

Source: New Economy New Economy and Recovery Authority (NewERA)

There is significant diversity amongst this group in terms of activities, size, resources, and the centrality of climate action to their primary businesses. In addition, each company is at its own stage in the climate action journey, with some companies more experienced than others in this area to-date. With a view to informing the development of the climate action framework, NewERA has engaged individually with each of the twenty-two companies. Their objective was to gather information on their climate action objectives and to undertake research on best practice approaches to various aspects of corporate climate action objectives.

Meeting the commitments

As pointed out above, the Framework for commercial semi-State companies is a series of five commitments by the companies in relation to their climate action objectives. When a semi-State company signs up to the Framework, it is entering into each of those commitments.

The approach that newERA took in the framing of the commitments is as follows:

‒ The five commitments reflect the three centrally designated frameworks which were highlighted in the ‘Public Sector Leading by Example’ sections of the Climate Action Plan 2019 and 2021 as well as two further elements specific to the corporate environment;

‒ For each commitment, NewERA reviewed relevant policy and publications by advisory and non-governmental bodies, with a view to identifying best practice; and

‒ This best practice is seen as a targeted approach with each company committed to working towards implementing in each of the five areas.

There are also funding implications for semi-State companies in implementing this new framework. It states that – “It is expected that the CSS companies will fund the cost of meeting the commitments in the Framework, and of the investments required to achieve their climate action objectives, from their own resources.” Climate Action Framework for the commercial semi-State sector

There is clearly a significant volume of work that commercial semi-State companies will have to undertake once they signed-up to the framework. That volume can be gauged from the sixteen targets that must be met under the five commitments. The sixteen targets are summarised in Box 2.

Implementation will not be easy

The real test of the framework will be the success in delivering under the listed targets. Some individual companies may seek derogations from certain targets. This possibility was addressed by NewERA in the Framework. Accordingly, if cases are identified where it is deemed appropriate to tailor an aspect of the Framework for an individual semi-State company this could then be reflected in a letter issued to that company by its line minister at the time of implementation of the Framework. Once the Framework is in place, NewERA points out that it can be referred to in the Letter of Expectation that is required to be issued to each semi-State company by its line minister.

Reporting on progress will not done behind closed doors. The framework specifies that there will be reference to climate action objectives, including how each company expects to meet its general obligations under climate legislation alongside overall company performance reports in annual reports. Moreover, companies will be expected to publish their progress towards emission reduction targets. Companies will also be expected to provide evidence of carbon pricing used in appraisal of relevant investments for which Ministerial consents are sought under statutory or Code of Practice requirements. All the commitments listed in the Framework will not be easy to achieve. A considerable body of work will be required from each of the twenty-two companies and their subsidiaries.

Tom Ferris, Consultant Economist.

^{Tom Ferris is a Consultant Economist specialising in Better Regulation. He lectures on a number of PAI courses and blogs regularly for PAI. He was formerly the Senior Economist at the Department of Transport, Ireland.}