The State could face a cost of €20 billion if it fails to achieve reductions in carbon emissions in 2030, according to an assessment by the watchdog which advises on the public finances.
The figure is far higher than a previous estimate of about €8 billion from the Climate Change Advisory Council.
In its latest report, the Irish Fiscal Advisory Council said lower estimates assumed Ireland would follow through on measures “that it looks increasingly unlikely to implement”.
It warned the State faced much higher compliance costs “potentially as high as €20bn”.
Regarding the economy, the council said Ireland can expect steady growth, substantial tax receipts and record employment to continue.
It repeated its warning about over-reliance on soaring corporation tax receipts, and said 40% of the revenue is paid by just three multinationals in Ireland.
“The biggest risk is that budgets continue in this vein and exceptional corporation taxes dry up,” it said.
If this were to happen it would be “painful to reverse,” it added.
The council applauded the decision by the Government to set up two long term savings funds for windfall tax receipts.
However, it criticised the fact that only a third of the excess money was being saved.
It pointed out Norway set aside all its windfall from oil revenues.
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Focus on next government
The council has also warned about the Government’s rapid growth in expenditure which it said will rise 8% this year and next.
It also criticised continuous overruns in spending, which it says will reach €3.8bn this year.
It said that means budget forecasts were “not credible”.
It has called for the next government to set out a rule to limit spending that “it will stick to” and added it would help “avoid needless job losses in the next recession.”
The council has also called for the next government to undertake a comprehensive review of health expenditure, to set out more realistic spending ceilings that allow for “highly predictable cost pressures”.
Chair of the Fiscal Advisory Council Seamus Coffey called for realistic plans to “tackle infrastructure deficits, ageing pressures, and climate needs, while also protecting growth”.
Speaking on RTÉ’s Morning Ireland, he said a more medium-term approach to budgeting is needed and the council is looking at some changes to the fiscal framework, particularly at EU level.
“There’s a hope to move away from the annual short-term approach to budgeting … to a more medium-term over a three, four, five year period,” he said.
“One of the first things a new government will have to do is submit a fiscal plan over a five-year period to the European Commission setting out by how much they plan to increase spending by each year over the next five years.
“The hope is that we move away from the annual short-term budgeting approach with lots of announcements made in September and October to a more medium-term where departments can plan not what they’re going to be doing over the next 12 months but over the next two, three, four years.”
