This week, Ireland’s lower house of parliament approved a bill that calls for the Ireland Strategic Investment Fund (ISIF) to divest of fossil fuels “as soon as practicable.” While many divestment proponents are heralding this move as a “landmark moment,” here are five things to know about what Ireland did, and more importantly DID NOT do, regarding divestment and what it means for the country.
1) Ireland Has Not Yet Approved Divestment. Despite headlines claiming that “Ireland becomes world’s first country to divest from fossil fuels,” in reality no such action has taken place. Only the lower house of parliament has approved a divestment bill; it still needs to be approved by the upper parliament and then signed into law by the President. While the bill is expected to become law later this year, celebrations of immediate divestment are premature. Furthermore, there is no specific timeframe for divestment included in the bill. There is only vague language that says it should be done “as soon as practicable.” A five-year deadline was originally included in the bill, but it was amended to allow more flexibility. The lack of a specific deadline means this bill could be all bark and no bite.
2) Divestment Would Impact a Miniscule Portion of Ireland’s Fund. The ISIF is currently valued at €9 billion. As reported by the Financial Times, as of June 2017, the fund had €288 million invested in 153 fossil fuel companies. This equals just 3.23 percent of the overall fund. Meaning that if Ireland does ultimately decide to divest, it would be an almost purely symbolic move with little to no real impact.
3) The Bill Allows for Exemptions, Which Includes Natural Gas Plants. The bill would prohibit the ISIF from investing in companies that derives more than 20 percent of its revenue from fossil fuels, which are defined as coal, oil, natural gas, and peat. However, the bill was “watered down” to include exemptions for fossil fuel investments that are deemed to be in line with Ireland’s climate goals. According to the bill’s sponsor, “these changes had been made to allow for investments in facilities such as natural gas plants that may be part of an energy transition toward low-carbon fuels.” Even the bill’s sponsor recognizes that natural gas is a cleaner form of energy that has helped reduce carbon emissions.
4) Divestment Will Not Help Ireland Meet Emission Targets. Ireland is under intense scrutiny for its failure to reduce carbon emission, and will face up to a €600 million fine when it misses the 2020 emission target set by the European Union. In addition, Ireland ranked last among European Union member states in the 2018 Climate Change Performance Index. However, this divestment bill would do nothing to help Ireland reduce its emissions or create any kind of meaningful environmental benefit. First, as highlighted above, the amount it would be divesting is pitifully small. Second, economic experts have noted that divestment has “no discernable impact” on the companies being targeted by the policy. It simply transfers shares from one investor to another.
5) Ireland Remains Heavily Dependent on Natural Gas Imports. Ireland is one of the most energy dependent countries in the world – and imports approximately 85 percent of its energy. Natural gas makes up nearly 30 percent of its total energy supply, and helps generate 55 percent of Ireland’s electricity. Approximately 96 percent of the natural gas used in Ireland is imported. While the country looks to expand its use of renewable energy and build out its wind capacity, it will continue to rely heavily on natural gas. Divestment and other policies that seek to ban the use of natural gas and other fossil fuels will only hurt Ireland’s economy and cause energy prices to soar. Just recently, seven utility companies in Ireland announced they were raising electricity prices, causing one Irish Bishop to warn of an “energy poverty crisis” in the country. Divestment and other failed policies to limit the use of fossil fuels will only make the crisis worse.
Ireland’s actions yesterday certainly generated headlines around the world, but at the end of the day, this is another example of #FakeDivestment. No specific divestment action was taken, there is no clear timeline for divesting, only 3 percent of the fund would be impacted, and natural gas plants can be exempted.