Davy estimates that at least €129 billion will be invested in dedicated energy transition measures in the Republic of Ireland to address climate change between 2024 and 2030.
The stockbroker says this equates to over €18.5bn investment per year, and is roughly equivalent to €25,000 per person by 2030.
"Investing in tomorrow: Shaping a Net Zero future" examines how this investment will be funded and by whom.
Author of the report, Dr Fergal McNamara, finds that the private sector, driven by electrification of energy and transport and retrofitting of homes and businesses, will account for 85% of planned investment.
Though Dr McNamara's analysis is focussed on dedicated energy transition measures he notes that total investment on measures substantially attributable to climate, including tens of billions of euro of planned investment under the National Development Plan, will likely exceed €150bn, making it the largest ever investment by the State, households and businesses.
"Though these are punchy numbers, they dwarf the environmental, economic, political and social costs of doing nothing, as evidenced by the destruction and cost of recent flooding in East Cork," Dr McNamara said. "EU fines and reputational damage will also keep Ireland's 'feet to the fire’ to deliver on climate change objectives or suffer even greater cost over the longer term."
Davy envisages planned investment in dedicated energy transition measures will be funded as follows:
Sector spread:
- Electrification of energy and transport will each account for one third or €43bn investment (€86bn total)
- Retrofitting of homes (€23bn) and commercial buildings (€13bn) will account for approximately 28% (€36bn total), with
- Agriculture (€4.3bn) and Industry (€3bn) making up the balance
Private sector:
- Over 85% or €110bn will come from the private sector, of which €97bn will come from debt / savings, with almost €13bn in the form of equity – mainly attributable to the electrification of energy. Private spending includes consumer spending of €57 billion on electric vehicles and on home retrofitting.
Public Expenditure:
- Around 14% or €18 billion will come from the public purse, equating to almost €2.6bn per annum.
- New V’s business as usual investment: €54.6 billion (over 42%) will be incremental investment and €74.4 billion (almost 58%) will replace existing 'business as usual’ investment.
"Climate investment represents both a substantial opportunity and challenge and doubtless will focus attention and debate on investment across sectors relative to their respective climate emissions, agriculture typically being a case in point. That debate need not delay investment in areas and in sectors where the known benefits of planned investment are indisputable and are, in many cases, self-financing," Dr McNamara said.
"The private sector, driven by electrification of energy and transport will account for 85% of planned investment, but that is contingent on appropriate State support for investment in the renewables sector in particular, as a catalyst for deeper behavioural change."
He said investment in renewables is now at a key inflection point. Everyone agrees electrification of energy is a critical enabler, yet equity markets are hesitant to invest due to higher cost-of-capital, inflation and supply chain challenges. The absence of appropriate supports and incentives risks hampering progress and momentum, at potentially greater cost over the longer term, than effective upfront incentives, he said.
"Despite considerable public and political support, progress on climate change in Ireland, as in most other economies, remains slow. There are well-known and considerable inhibitors to investment including: planning, permitting and public acceptance of infrastructure, notably the electricity grid; skills and labour shortages; and global supply chain blockages.
"However, given broad based support for these measures, underpinned by national, international, EU and domestic law, Ireland is optimally positioned for a step change in ambition and delivery. Key to delivering on this ambition will be agile public policies and targeted incentives to encourage investment in sectors that are critical enablers of downstream investment and behavioural change" Dr McNamara said.
