Government»It's not Emerald It's Green
»Monday, June 15,2009
Of all the world's developed nations, Ireland is the one that is closest to a depression. The banking system is shot, the housing market has collapsed, unemployment is expected to rise to more than one in six of the population. The deterioration in the public finances – and this is saying something – has been even more acute than in Britain. The Irish economy is expected to contract this year by just under 10%.
That's just a bit of the bad news. While Labour and the Conservatives at Westminster bicker about which party is going to make spending cuts, Ireland has already had four stabs at reducing its budget deficit in the past year. Spending programmes have been slashed and tax increases announced.
Green new deal
Without the measures announced by the government in April's budget, the deficit this year would have come in at 12.75% of gross domestic product (GDP). It is now expected to be two points lower than that.
The good news is that Ireland's predicament makes it a prime candidate for a "green new deal" – policies aimed not just at helping the economy through a difficult time but also to make it better able to face the twin challenges of a world where fossil fuels are dwindling and the temperature is rising.
Even better news is that Ireland appears quite keen to act as Europe's guinea pig for the green new deal concept, and is likely to reap a considerable dividend as a result. While the short-term outlook for Ireland is dire, the longer term picture is much rosier. As Eamon Ryan, a Green party minister in the coalition government, put it: "The crisis makes it easier … The status quo is gone. This is a moment when you can recalibrate everything."
Policymakers in Dublin see it this way. As a country on the western edge of Europe, Ireland is particularly vulnerable to peak oil and peak gas. It has no fossil fuels to speak of and is at the end of the pipelines that bring gas from Russia. Dell's decision to close its Limerick plant and move production to Poland underlines Ireland's vulnerability to the constant search by US inward investors to reduce costs.
But these weaknesses are outweighed by considerable strengths. The first is that Ireland's export sector, despite the loss of some big names and the impact of the global downturn, has come through the events of the past nine months relatively unscathed. Overseas sales are down, but not by nearly as much as in other export-led economies such as Germany and Japan. Although it has recently experienced the downside of footloose global capitalism, the Celtic Tiger period of the 1990s provided Ireland with a core of hi-tech expertise in sectors such as IT, pharmaceuticals and medical equipment. The intention is to use this strong industrial platform as the springboard for a green manufacturing revolution.
A second is that Ireland's recession has nothing to do with banks dabbling in exotic financial instruments and everything to do with the failure to prevent the rapid growth of the 1990s turning into a colossal housing bubble in the noughties. From the air, the country looks as if it has measles: it is pockmarked by ugly Southfork-style homes built during a boom that saw construction accounting for 15% of GDP. In the UK, by comparison, construction is about 6% of GDP.
A third advantage is that Ireland's framework for decision-making is more like Germany's than Britain's. It operates a system of social partnership in which the government, unions, business, the agricultural lobby and civil society collaborate to find consensual solutions to the country's problems. The downside of this approach is that it can be slow-moving and cumbersome; the upside is that when the social partners agree, things can happen fast.
Brendan Halligan, the chairman of Sustainable Development Ireland, believes the social partners have not yet quite internalised the green agenda but are close to doing so. "The Irish system is very peculiar," he said. "It takes time but when it decides to do something it does it, and it does it well." That process is being accelerated by the presence of the Green ministers in the coalition with Fianna Fáil, but the idea of a green new deal has been embraced across the political spectrum. The opposition Fine Gael – while lambasting the prime minister, Brian Cowen, for presiding over a "bubble economy" – says that as the world enters a third industrial revolution driven by climate change and peak oil, "the Irish state must once again lead the way in reorienting our industrial and economic structures."
Forfás, Ireland's national policy body for enterprise, will provide the expertise for a high-level action group on the green economy. It will look at four areas: renewables, water and waste water, waste management, and consultancy on energy and the environment. Given that Ireland is often battered by the wind and waves that sweep in off the Atlantic ocean, it is hardly surprising that Forfás sees ocean and wind power as crucial to having 40% of power generated by renewable energy sources by 2020.
Forfás is looking at ways to redeploy unemployed construction workers into the green sector. It is also counting on universities to provide the brain power for a green industrial revolution and wants to re-focus a strong R&D sector so that it provides the know-how for the transition to a cleaner environment.
It is not going to be plain sailing. A quarter of Ireland's emissions come from agriculture and progress there is likely to be slow. Comhar, the government-funded sustainability development council, makes the point that retro-fitting homes to make them more energy efficient is good, but it would have been better to have built houses to better specifications. So far, budget cuts have not impaired the development of a green new deal, but the speed of progress will depend on when Ireland emerges from its slump.
Where the UK government talks a lot about sustainability and opportunities in a low-carbon economy, the Irish government appears to be putting words into action. Forfás wants Dublin and Belfast to co-operate on developing wind and ocean power as well as on electricity supply. Northern Ireland has a strong manufacturing tradition ripe for transformation into the new environmental industries. If it waits for London to get its act together, it may wait a very long time.