Dublin Climate Summit 2022: In Conversation with Minister Paschal Donohoe
MORE WAYS TO LISTEN
Live from the Dublin Climate Summit 2022, this episode of Ibec Voices features President of the Eurogroup, Minister Paschal Donohoe, and Jackie King, Ibec Executive Director of International Business.
In a Q&A session at the Summit the pair cover a range of pressing topics, including the impact of Covid-19 and the war in Ukraine on the EU’s focus on Climate and Green Plans, the priorities of the Eurogroup from a sustainability perspective, and the importance the European green bonds as an instrument in financing the Green Transition.
The Summit is a premium sustainability and climate-focused gathering where industry, business and Government join forces to drive forward the ESG agenda, with Ibec Global the event’s European Partner.
Transcript
Paschal Donohoe: COVID, out of that extraordinary experience and great journey that we all went through, did for many of my fellow ministers and certainly for me, remind us of the intimate and deeply important link between our natural environment and what happens then to economies and to societies.
Jackie King: My name is Jackie King. I'm the Executive Director of International Business at Ibec. In this episode of Ibec Voices, we are bringing to you my discussion with Eurogroup President Paschal Donohoe, TD, which took place at the Dublin Climate Summit on May 12th.
The Dublin Climate Summit is the leading international conference where investment, finance, and policy-maker leaders meet to discuss meaningful action we can take to deliver on our net-zero goals. Ibec Global is proud to be the European partner for this important event.
During my discussion, we covered topics such as the impact of COVID and the war in Ukraine on the EU's focus on climate and green plans, the priorities of the Eurogroup from a sustainability perspective, and the importance of the European Green Bonds as an instrument in financing the green transition. I hope you enjoy the episode.
Jackie King: Let me start and go back to what you mentioned earlier when you first joined the group of finance ministers five years ago and the priority that climate took in many of your discussions.
Given everything that's happened now—first COVID, then Ukraine, and the aftermath of all that inflation and the energy crisis—maybe give us a little bit of insight on how much time is spent now on those discussions when you meet in Brussels these days.
Paschal Donohoe: Well, I've been positively surprised twice with regard to this. Because across the first phase as a member of that finance minister group, the kind of issues that all of you are discussing here today did get some time on our agenda, but they weren't really core issues that we would have looked at each month.
When COVID hit, the fear and even the expectation that I had was that those kind of issues would be taken even further to the side, even though they had been growing in importance as we were responding back to the deepening understanding that we have of what was underway in the world.
But actually, COVID, out of that extraordinary experience and great journey that we all went through, did for many of my fellow ministers and certainly for me, remind us of the intimate and deeply important link between our natural environment and what happens then to economies and to societies.
And actually, the environmental concerns that are now so vital to us grew in importance. The tangible example of that is when the recovery fund for COVID was put together for the European Union, which is over €600 billion—over €300 billion in direct grants.
The decision was made that a large share of that had to go into projects to help us deliver our climate objectives and legal targets. Three or four years ago, I can't imagine that happening. So that's a very tangible example of it.
Then, when this awful war in Ukraine—this terrible, terrible conflict—began to develop, again the question I asked myself was whether that would result in the opportunity for another derailment of this agenda. But actually, again, the opposite has happened.
What governments and ministers now fully understand is that if we do want to become energy independent and we do want to reduce our reliance—which is going to take time—on imported oil and gas, then actually renewable energy is the only medium-term game in town.
And what I've now seen happen is the security agenda—the hardcore security and economic security agenda—is now the other side of the coin of the renewable energy debate.
Now, that's not to say for a moment that the choices or funding needs get any easier. But it is to make the point that the issues that you've all talked about here this morning are getting more and more hardwired into the work now that Departments of Finance across the EU have to do and has become their bread and butter.
Jackie King: Yeah. And when you said it gave you an opportunity as ministers to act quickly, I think what COVID showed us is just how quickly governments can act when they work together with other business and other organizations. I think that bodes well for the future as well on everything that's happening now.
And you touched on energy independence. So the Green Deal and the green plans now seem to be very much connected with independence from Russian oil and gas and an acceleration of wind and solar projects.
But that's not as easy as it sounds, obviously. You've also got the public dynamic to that. When you've got a little bit of NIMBYism happening—"Yes, do that, but don't put anything up in my backyard"—when you've got people facing inflationary pressures and the cost of energy, how are you addressing all of that at the same time as making plans for the future and transitioning to green?
Paschal Donohoe: Yes, so it's a great question and has probably been the dominant political theme here in Ireland now over the last six to eight weeks: How indeed do we get that balance right?
To sound one note not of pessimism, but maybe I hope instead of realism: The climate challenge and the COVID challenge did have one fundamental difference, which does have an impact on how governments respond back to it.
The pandemic was an immediate systemic risk that happened over a few weeks that brought into question the ability of our economies to actually function. So it was immediate, right in our face, risk.
And the economic function that I mentioned a moment ago, of course, was a minor one really in the context of at that time the thousands of people that were dying and the awful scenes that we were seeing in so many parts of Europe.
In contrast to where we are with climate—and this is why it's such a big political and policy agenda—even though the risks are absolutely gigantic, for this part of the evolution of this climate risk, the steps are of course gradual and incremental.
Things are getting worse minutely moment by moment until you get to a point in the change in which it becomes non-linear and it happens very, very quickly.
And that means it's a different risk to try to make the case for within societies and within economies, which then is the background to your question. At a time of rising prices and such inflationary difficulties—and you're aware of the figures that were confirmed today from an inflationary point of view—how can you make that case?
So, again, to look at it optimistically and to make the case for hope and being able to make progress: On one hand, you could see that the price signals that the markets are now sending out about the cost of energy isn't just about the things that are happening in our supply chains due to COVID, isn't just about what now is happening due to the war in Ukraine.
It's the early part of the long-term signaling from financial markets regarding what will be the cost of energy as that energy over time becomes less used and used in a different way.
And maybe what will happen from a societal point of view is that will begin to affect our consumption levels of that energy. And that might get us in more of a positive trend regarding use of public transport, being able to make the case for retrofitting, the kind of changes that people will make in their daily lives. Maybe that is a silver lining in what is at the moment a very difficult environment for people.
And then, on the more challenging end of it, of course, then it is very difficult then to be able to make the case for carbon taxation, for carbon pricing, when the cost of energy is going up anyway.
It's very difficult to have to make the case then for costly private investments maybe in your home, in your car, when the standard of living is going up too.
And that is why, you know, it is important to take the steps that we can to help with the rising cost of living. Central banks have their own decisions to make, so that from the point of view of a household or a business—a smaller business in particular—they still have the capacity to respond back then to the changes that we'll have to make due to the climate crisis.
Jackie King: Yeah, and I think that just reinforces the "we're all in this together" sentiment. And I think I'm optimistic around that as well because we've got this younger generation of leaders coming up that are pushing forward on many of those fronts.
In your role as President of the Eurogroup, how are the priorities evolving and the discussions happening, and the time and energy and focus that you give to climate in the Eurogroup policymaking? Or is there any difference?
Paschal Donohoe: Oh, a huge one. I just can't give a better example of it than the way the Recovery Fund has been designed. I mean, tens upon tens of billions of euros in the next 12 months will be going into the investments in a greener future that audiences such as this have been making the case for years.
And it's going to be funded through common debt issuance, which is a fundamental development within the European Union.
So, very practically, what that means now is we are a net contributor to this fund. Ireland will be paying into this fund, we'll be using our creditworthiness to allow other countries to make an investment in a greener future which, if they were on their own, they wouldn't have the ability to pay for or would cost more for them to do.
That tangibly is what it looks like. We're using our creditworthiness, our budgetary strength to contribute to a European fund so that all of the EU can do this together.
And I mean, if you just contrast where we were with that, for example, with the global financial crisis, which—it feels a long time ago, but it really isn't that long ago—can you imagine then in the aftermath of that, A) these kind of investment decisions being made, but B) if those investment decisions were being made, that this focus on climate would be as high as it is now? And I don't think it would have happened as it is now.
Jackie King: I think you're absolutely right about that. In April, the Council of the EU agreed its position on European green bonds and negotiations will now start with the European Parliament.
From your perspective, how effective and how important is that instrument in financing the transition?
Paschal Donohoe: So this is already something Ireland has been very active in. The NTMA, you've got a new Chief Executive now in Frank O'Connor, have already done much work in this. It's something we really, really welcome.
And the focus of the work, as I just mentioned a moment ago, will now be with the European Parliament in trying to make sure that we have very clear standards regarding what those green bonds should look like.
Because it is something that financial markets demand. And if financial markets believe those standards are not being adhered to, it will of course influence the price they're willing to pay for such green bonds.
The risk is always there that if common standards are not there, it undermines the attractiveness of that offering to investors. And I certainly expect soon to see these financial instruments not only being more attractive for national sovereigns to issue, but I definitely see an increasing interest in demand from financial markets for them.
And if we can realize some of the ambition that we're talking about—and it's going to be really difficult and really hard—like, I've spent in the last three budgets that I've done, I put up the price of carbon in each of those budgets. I've ring-fenced the additional revenue from that higher tax in carbon and put it back into some of the investments that you've discussed here today.
And I know how difficult it is to make the political case for this. But if the European Union is successful even in most of our ambitions, I believe, number one, we will be able to demonstrate back to our citizens what is a new contemporary rationale for the EU.
And number two, I actually believe it will be part of the future of the Euro. Because if you look at the dollar, the dollar in many ways was associated with and fueled with what the energy markets of the 70s and 80s and 90s began to look like.
And if I look at the Euro, where I think the Euro's best chance for a stronger role in the global economy would be how we can demonstrate that the Euro is going to become the currency of a lower, far lower carbon future for Europe. And that is why the green bond debate and process is far more important than it might look. It's really, really important.
Jackie King: Ibec. The voice of Irish business.
Listen / Previous episodes
Ep. 9 / Ibec Responds
Economic Outlook Q1 2022: A difficult balancing act
For this short episode of Ibec Voices we are joined by Ibec Chief Economist and Head of National Policy Ger Brady and Ibec Economist, Hazel Ahern-Flynn.
Listen now
Ep. 8 / Ibec Responds
Economic Outlook Q4 2021: Help wanted!
For this this short episode of Ibec Voices we are joined by Ibec's Chief Economist Ger Brady and Economist Hazel Ahern-Flynn.
Listen now
Ep. 7 / Ibec Responds
COP26: Where do we go from here? Reflections with Minister Eamon Ryan
Dr Neil Walker speaks with Minister for the Environment, Climate and Communications, Eamon Ryan, about what was achieved at the UN climate summit in Glasgow over the previous two weeks.
Listen now
Ep. 6 / Ibec Responds
COP26: A discussion with Steve Varley, EY Global Vice Chair for Sustainability
With the second week of the conference underway our mini series with a focus on COP26 continues.
Listen now
