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Two technical chapters were added to the ‘Infrastructure Guidelines’ on 8 March. These chapters provide updated values for

  • Shadow Price of Carbon
  • Valuations for the estimated damage costs of non-greenhouse gas pollutants (NOX, SO2, PM and noise)

The expanded guidelines can be accessed from https://www.gov.ie/en/collection/e8040-infrastructure-guidelines/  The full titles of the new chapters are ‘Infrastructure Guidelines’: Central Technical References and Economic Appraisal Values’ and ‘Infrastructure Guidelines: Measuring and Valuing Changes in Greenhouse Gas Emissions’. For brevity, they are referred to as the Technical Chapters in this blog. Overall, the guidelines are managed by the Department of Public Expenditure, National Development Plan Delivery and Reform (DPENDPDR).

Composition of the ‘Infrastructure Guidelines’

The ‘Infrastructure Guidelines’ now has eighteen individual chapters, which are presented in PDF format i.e. in portable document format“. For facility, these chapters are listed individually in Table 1 and Table 2. The first table shows that eight chapters are new publications (six from December 2023 and two from March 2024), followed by seven chapters that have been republished from earlier versions of the Public Spending Code. The final three can be accessed from a separate website (see below).  

 

Appraisal of Current Expenditure

The foregoing chapters relate to capital expenditure. There are separate guidelines relating to current expenditure, which are overseen by DPENDPDR’s Government Accounting Unit. The relevant weblink is located at https://www.gov.ie/en/campaigns/db9e8-government-accounting/  The three sets of guidelines are presented as part of the ‘Value for Money Framework’ on the website and listed below in Table 2. They had previously been presented as components of the Public Spending Code. Accordingly, overall, there are eighteen chapters under the umbrella of ‘Infrastructure Guidelines’ – fifteen in the capital expenditure area and three in the current expenditure area.

Capturing Greenhouse Gas Emissions

Capital investments give rise to greenhouse gas emissions, both in construction and in the ongoing operation of assets. It is necessary that the ‘Infrastructure Guidelines’ capture the impact of emissions in making investment decisions. Under the guidelines, every project is required to quantify the greenhouse gas emissions that it may give rise to, and a Shadow Price of Carbon is applied to these emissions. An accurate Shadow Price of Carbon ensures the cost of emissions are properly captured when evaluating which projects are of overall benefit to society. It also prompts lower carbon choices in project design and ensures that the government recognises cost effective opportunities to make investments that can reduce emissions.

Since 2019 greenhouse gas emissions have been valued at the expected marginal cost society will face to remove greenhouse gas emissions sufficient to reach binding greenhouse gas emissions targets. Ireland’s climate targets at both national and EU level have increased significantly in ambition since the previous review of the Shadow Price of Carbon. Therefore, it was necessary to update the Shadow Price of Carbon used in public sector economic appraisal to ensure that it aligns with the national ambition on climate action, as set out in the Climate Action & Low Carbon Development (Amendment) Act 2021. The updating was not done in a vacuum. Officials from DPENDPDR worked with the Marine and Renewable Energy Institute in UCC to undertake modelling on a range of price scenarios to update the Shadow Price of Carbon to better align with Ireland’s climate targets. Over the past year, the application of these new values was piloted across a range of appraisals.

The updated Shadow Price of Carbon has now been published in the Technical Chapters for individual years up to and including the year 2055. For this blog, Table 3 shows the value for the next dozen years.

Monetising Other Non-Greenhouse Gas Emissions

The Technical Chapters also provide values to monetise other non-greenhouse gas emissions. Specifically, the values are described as being the cost of – “… Particulate Matter with a diameter of less than 2.5 micrometers (PM2.5), Nitrogen Oxide (NOx), Non-Methane Volatile Organic Compounds (NMVOCs) and Sulphur Oxide (SOx)”. The revised values are reproduced in Table 4 below. They relate to the estimated damage costs of non-greenhouse gas pollutants in Transport.

 It should be noted that the ‘Infrastructure Guidelines’ do not provide central values to monetise noise. Departments and public bodies have been advised to use values considered applicable in their own sectors – “…where noise is considered relevant, significant and practicable for inclusion.” 

Concluding remarks

The addition of the two recent chapters completes the full set of ‘Infrastructure Guidelines.’ As circumstances change, there will be a need to review the content of the individual chapters that make up the ‘Infrastructure Guidelines.’ The updating of the Shadow Price of Carbon was central to the evolution of the current ‘Infrastructure Guidelines.’ As Pascal Donohue, TD, Minister for Public Expenditure, National Development Plan Delivery and Reform, put it to the Oireachtas Joint Committee on Environment and Climate Action on 15 February 2024 – “…An accurate shadow price of carbon ensures the cost of emissions are properly considered when evaluating which projects are of overall benefit to society. It also prompts lower carbon choices in project design and ensures that the Government recognises cost effective opportunities to make investments that can reduce emissions.” 

https://data.oireachtas.ie/ie/oireachtas/committee/dail/33/joint_committee_on_environment_and_climate_action/submissions/2024/2024-02-15_opening-statement-paschal-donohoe-t-d-minister-for-public-expenditure-ndp-delivery-and-reform_en.pdf

The availability of the comprehensive set of ‘Infrastructure Guidelines’ is a necessary but not a sufficient condition. Government Department and Agencies must have the capacity to apply the guidelines. For that reason, DPENDPDR’s Circular 24/2023  states quite clearly that – “It is the responsibility of government departments and their Accounting Officers to ensure that, where required, departments and agencies draw up their own sector specific procedures for evaluating, planning and managing public investment, which align with the Infrastructure Guidelines”. https://www.gov.ie/en/circular/2c314-circular-24-2023-update-of-the-infrastructure-guidelines-capital-spending-requirements/   Such action should not be behind closed doors. It is imperative that regular reports be published to demonstrate that departments and agencies are fully implementing the requirements of the new guidelines. Only in this way can Irish taxpayers be assured that they are getting real value for money from public expenditure.

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.