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EPA Research Report No. 316 The ultimate objective of environmental regulation is the prevention and reduction of environmental harm from pollution, habitat loss and resource depletion. This desk study reviewed the development of environmental performance measures for the promotion of compliance and the measurement of the impact of and outcomes from enforcement activity. The research also reviewed types of metrics of environmental outcomes available in Ireland and gaps in these metrics. The review examined new approaches that are more collaborative, as well as trends in environmental enforcement activities, coupled with recent developments in the environmental enforcement methods of enforcement agencies in Scotland, England and Wales, and Canada. The findings from this research provide an update of current practices and recent changes introduced in some jurisdictions, with the target audience being the Environmental Protection Agency (EPA), industrial environmental managers and compliance officers, researchers and policymakers.

EPA Research Report No. 276 Irish electricity generators and energy-intensive industry are obliged to participate in the EU emissions trading system and this may lead to an increase in production costs for these companies. Reform of the European Union Emissions Trading System (EU ETS) has seen significant price increases and may lead to further volatility in prices for emissions allowances. There are concerns that increased costs of compliance will have a negative impact on business competitiveness in Ireland. This project aims to investigate the effects of the EU ETS on competitiveness by (i) reviewing the literature on regulation and firm competitiveness, (ii) analysing firm-level data to determine the impact of the EU ETS and green investment on the competitiveness of Irish industry thus far, (iii) using a survey to find the opinions of stakeholders regarding the EU ETS and emission reduction projects and (iv) estimating the effect on future electricity prices if Ireland were to participate in a carbon price floor.

If the ambitious objectives of the international community, as set out in the Paris Agreement of December 2015, are to be met, rapid decarbonisation is required over the coming decades, particularly in developed countries. Many industrialised countries are incentivising the uptake of low-carbon and resource efficient technologies such as waste-to-energy, wind, solar photovoltaic (PV), and biomass heating systems, which alone have the potential to make a very substantial contribution to global decarbonisation by 2050 (IEA, 2015). It is notable that these technologies are particularly attractive to local citizen investors who are acting individually, as a member of a community group or as party to a project by a professional developer (Enzensberger et al., 2003). This is because of their maturity, modularity, high reliability, the simplicity of the energy generation process and availability of technical service providers (Yildiz, 2014). These technologies, however, face a number of barriers when it comes to widespread deployment; this means that their full potential cannot not realised. According to the Intergovernmental Panel on Climate Change (IPCC), policy must address these barriers to enable the full theoretical potential for mitigation to be realised. As illustrated in Figure 1.1, these barriers are not just technical and economic, but also relate to socio-economic, regulatory and institutional factors (IPCC-WGIII, 2001, p. 752). The focus of this report is on addressing two of the key barriers identified in the IPCC typology: financial barriers (and the consequent investment shortfall in low-carbon technologies (LCTs) (section 1.2)), and lack of social support among citizens for low-carbon transition (section 1.3). These barriers are discussed in turn, focusing on the potential for citizen investment to address them.

Decarbonisation of the global economy requires an energy transition of exceptional scope, depth and speed, and a doubling of the current level of investment in low-carbon technologies. However, the risk perception of individual market participants—a key determinant of the pace at which these technologies will be deployed—is an under-addressed theme in the academic literature. In this thesis the risk-return preferences and investment attributes that are attractive to different types of investors are investigated, with a view to informing the design of financial incentives introduced by Governments. In Chapter 2 the literature assessing the impact of technology-specific financial incentives on the levels of investment in low carbon technologies from local citizen investors is evaluated. It is concluded that feed in tariffs, grants and tax incentives can be successful in mobilising greater levels of investment from non-traditional investors, but that soft loans are less effective as a stand-alone instrument. In the following chapter, a novel analytical approach is introduced to explore the use of financial incentives in key jurisdictions to overcome barriers to investment from local citizen actors. The importance of instrument design over instrument choice emerged from this analysis. The requirement for incentives at feasibility and development stages of renewable projects also emerged as a distinguishing feature of projects with citizen involvement, reflecting the high risk-aversion of these actors, as well as their inability to manage risk across a portfolio of projects. At later project stages, market-independent supports (feed in tariffs, grants and tax incentives) were found to have been effectively deployed, however, more market-based instruments (feed in premiums and quota schemes) were also found to be effective if tailored to the specific needs of citizen investors. In Chapter 4 the risk-return preferences of a representative sample of citizen investors in Ireland—a market with no citizen investment tradition—were explored using a choice experiment. A high level of interest in investing in wind, solar, biomass and waste-to-energy projects was uncovered, however, a majority of citizens were found to be highly risk-averse, and investment amounts were low compared to equity required for larger projects. These findings suggest that greater levels of investment capital could be mobilized from citizen investors using specifically tailored incentives. However, these actors can only make a limited overall contribution, and promoting greater levels of investment from professional investors is crucial if climate objectives are to be met. In Chapter 5, semi-structured interviews and an on-line survey were therefore used to compare attitudes to stranding risk for investors in power generation assets with investors in financial assets. Asset stranding risk was found to be a more prominent issue for the former cohort, suggesting that as you move along the investment chain—away from physical assets and towards financial assets—far less is known about climate risk, and it becomes increasingly challenging for investors to manage it. Managing the risks face by different investor cohorts emerges as an important means of mobilising greater levels of investment and reducing the cost of capital for low-carbon technologies, which in turn has the potential to increase the speed of energy transition. Understanding the risk-return preferences of different cohorts of investors, however, remains both understudied and underappreciated in the climate policy and climate finance literature. The findings from this study both address this literature gap and uncover several themes meriting further analysis and investigation.