Ireland has taken the momentous step of becoming the first country in the world to divest from fossil fuels after the Irish Parliament passed a bill this summer requiring public funds to sell off fossil fuel investments “as soon as practicable.” Ireland divesting from fossil fuels like coal, oil, gas, and peat represents the reallocation of about €318 million ($380 million).
Other countries have pushed their own green initiatives forward with varying levels of success—last year, Norway’s central bank recommended the country’s sovereign fund sell out of oil holdings. But this suggestion was made for financial rather than environmental reasons and has yet to be adopted. This means that at present, though cities like New York have similar plans, as a country Ireland stands alone in its firm commitment to sell its investments in fossil fuels. If carried out, Ireland’s move would mark a significant departure not only for the world but for the nation and its past, too.
Reversing Ireland’s Sustainability Record
“Let us show the Irish public and the international community that we are ready to think and act beyond narrow short-term and vested interests,” independent Irish politician Thomas Pringle said. Pringle, who was one the proponents of Ireland divesting from fossil fuels, hailed the move as an opportunity for the country to start taking climate change seriously and distance itself from its less-than-stellar reputation with environmental issues.
In the recent past, Ireland has faced a bumpy ride on the road to sustainability. A June 2018 Climate Action Network Europe (CAN) report named Ireland as one of the worst-performing EU countries on tackling climate change. Among EU states, in fact, only Poland ranked below Ireland in its compliance with the Paris Agreement. The report also described a lack of ambition on Ireland’s part concerning its climate change policies, warning that Ireland was on course to face annual noncompliance costs of €500 million ($574 million). Ireland also scored “very low” in the 2018 Climate Change Performance Index.
This climate change record makes Ireland’s plans all the more notable. Looking back further, the motion requiring Ireland’s national investment fund to sell all holdings related to fossil fuels, including peat, even conflicts with Irish tradition. For centuries, peat from local bogs has been used as a vital energy source for cooking and heating. Some estimate that one in five Irish citizens living in rural areas still use coal or peat to heat their homes.
Next Steps for Divestment
Public criticism of Ireland’s sustainability programs may have helped move the country to action—the vote by the Irish Parliament in favor of divesting of fossil fuels investments came less than a month after the publication of the CAN report. There are signs, however, that the tide in Ireland had already begun to turn toward more environmentally friendly energy sources. For instance, Ireland was one of the biggest adopters of wind energy within the EU during 2017. Wind installations across its generating system rose from 255 megawatt capacity installed in 2016 to 426 in 2017. Wind energy now provides 24% of Ireland’s total energy needs, which makes it the EU country with the most new wind capacity relative to its total power consumption.
With the bill seeing support from both the Irish parliament and Prime Minister Leo Varadkar, Ireland’s Senate is anticipated to ratify the bill into law before 2019. That said, it remains unclear how quickly the national investment fund will actually sell off its fossil fuel holdings. While the original draft of the bill required full divestment from fossil fuels within five years, this was later rewritten to provide greater flexibility. It will, however, prevent the fund from making fresh investments in holdings related to fossil fuels.
There are currently no known plans for how the €8.9 billion ($10.4 billion) sovereign fund will reallocate divested funds. With the government having taken one decisive step down the environmental, social, and governance (ESG) path, it could encounter calls to go further or demands that the sovereign fund adopt a broader set of ESG criteria for its investments. That said, there’s no doubt that this is a ground-breaking move that could see other countries making their own commitments.