Additional investment of more than €50 billion is likely to be needed until 2050 to meet Ireland’s decarbonisation targets with most of it incurred over the next decade, according to Central Bank deputy governor Vasileios Madouros.
“The macroeconomic costs of taking action to reduce greenhouse emissions are much smaller than costs associated with inaction”, he told an event in Dublin on Wednesday marking Climate Finance Week.
Likewise, climate change costs significantly outweigh those of the transition to net-zero emissions, Mr Madouros said.
“In an economy with little spare capacity – undertaking those investments will require redirecting some scarce resources away from the tradable sector of the economy,” he said.
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But given Ireland’s heavy dependence on imported fossil fuels, moving to a climate-neutral economy would bring long-term savings.
Ireland had reduced emissions by 12 per cent since 2018, coinciding with 10 per cent of population growth, while the domestic economy had grown by 30 per cent in real terms.
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“We have seen a very positive decoupling between economic activity and emissions,” he said. However, the country was not on track to meet EU and national emissions targets for 2030.
Planetary, societal and macrofinancial risks from climate change had intensified over the past two decades because of failure to reduce emissions to the extent dictated by climate science, he said.
Tangible outcomes from countries’ collective actions since the 2015 Paris Agreement, however, illustrated “what can be achieved when nations come together”.
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Mr Madouros added: “We are no longer on a trajectory towards the very worst-case scenarios that were once feared. I emphasise that because – in [naturalist] Dr Jane Goodall’s words – ‘without hope, we fall into apathy, and do nothing’. However, it is also clear that we have not done enough.”
Rising temperatures, more frequent and severe weather events, and disruptions to communities, economies and financial systems remain pressing concerns.
The Network for Greening the Financial System – a coalition of central banks – had found, based on current nationally-determined contributions, “global GDP would be 13 per cent lower by 2050.”
Crystallisation of physical risks would be the main factor depressing economic activity. “Economic losses deepen with time, as higher temperatures caused by a lack of mitigation efforts result in higher chronic physical risk,” he warned.
The main risks for Ireland was increased likelihood of flooding, severe storms and rising sea levels.
“As we have already seen, flooding can cause significant damage to property and infrastructure, leading to economic losses for households and businesses, as well as the financial system.”
The Central Bank was working with the Office of Public Works (OPW) to create a national data set mapping every property in Ireland to current and future flood risks.
“We estimate that the share of the value of loans to businesses at risk of flooding would more than double under the OPW’s high-end scenario,” he said, while “the closer we get to that world, the higher the risk of underinsurance”.
