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SMEs need significant Govt support to meet climate goals, says CAI

The organisation representing 33,000 chartered accountants in Ireland has said individual businesses are not clear about what they can do in terms of investing in equipment, staff training, and the new sources of energy required for them to play their part in transitioning to a carbon neutral society.

Chartered Accountants Ireland (CAI) Director Brian Keegan said most small and medium enterprises will need significant support from Government if they are to deliver the climate targets for their sector.

The enterprise sector accounts for about 12% of Ireland's greenhouse gas emissions.

However, research by University College Cork has found that 86% of Irish businesses have not set any commitments to decarbonise, and 67% of start-up company founders and CEOs have no sustainability plan.

CAI said small and medium businesses lack the required skills, knowledge, and capacity to develop and implement climate strategies and take effective action.

They are calling on the Government to implement a list of what they describe as practical proposals and recommendations to accelerate climate action in the enterprise sector.

These include changes to the taxation system to encourage investment, more supports for electric vehicles and charging infrastructure, reducing VAT on sustainable goods, and the introduction of a new "help-to-insulate" scheme along the lines of the help-to-buy scheme for house buyers.

They are also calling for measures to make access to Government grants and green finance easier for businesses, and for additional supports for training and education in the business sector.

A survey of CAI members showed most are not confident that Ireland will meet its climate targets by 2030.

It also revealed that while there is a general awareness that grants, and funding, are available to businesses for climate-positive actions most businesses have not claimed any of these supports and have no plans to do so.

A survey of CAI members showed most are not confident that Ireland will meet its climate targets by 2030

Mr Keegan noted the Government has introduced more than 20 individual business supports including grants and incentives for climate action but said CAI are finding that most businesses are not fully aware of what is available to them and how they can be implemented.

The representative body is calling for accelerated capital allowances for businesses who invest in new infrastructure and other measures to reduce their greenhouse gas emissions and work towards carbon neutrality.

Mr Keegan said the Government should not be looking to tax electric cars in the same way as internal combustion engines. He also called for tax credits for any climate-related research and development conducted by small and medium enterprises.

CAI is looking for Government support in communication and awareness-raising so that all businesses get to understand the role they need to play in achieving Ireland’s climate goals.

They recommend using trusted advisors, peer-to-peer networks, and professional and business associations, and building a strong network of communicators, with representatives from central and local government, business groups, workers, local communities, and social partners to disseminate information.

The report says businesses must be provided with the tools and supports to take effective climate action and that substantial retraining and upskilling of the workforce is essential.

The report by CAI is titled "Achieving our Climate Goals".

It says:

  • Government communications should emphasise all opportunities for businesses taking effective action on the climate crisis. These could include the ability to avail of lower-cost finance in the form of grants and loans, and benefits that arise from decarbonising heating and cooling systems.

  • It could also highlight the co-benefits of valuing nature through collective investment in, for example, peatland restoration projects.

  • Funding for training should be extended to include fees for expert advisors who can take a holistic view of a business’ specific requirements, and help them to make the right strategic, financial and operational decisions about sustainability.

  • There should be tax reliefs for businesses that buy local and/or buy "circular" and reusable products, offer a take-back service and/or offer products as a service, e.g. cooling as a service, mobility as a service.

  • The tax system could further accelerate business commitment to net-zero targets by extending the Help to Buy Scheme to include Help to Insulate for buyers of older second-hand homes with a poor Building Energy Rating (BER) would help alleviate the cost of retrofitting.

  • Where homeowners and landlords retrofit a property to improve its energy rating, they should have 100% capital allowances against total income in the year the work is done.

  • The accelerated capital allowance regime should be simplified for energy-efficient equipment and promoting the scheme to encourage greater uptake.

  • The Government could also consider reducing the VAT rate on EVs to make prices more competitive and consider extending the 0% Benefit-In-Kind tax rate on company electric cars to incentivise companies to "green" their company car fleet.

  • Apply for an EU derogation to enable a temporary VAT on goods that do not adversely impact the environment, such as organic goods and fertilisers, or goods made from recycled materials.

Green transition will 'have implications for public spending' - IFAC

The acting chair of the Irish Fiscal Advisory Council (IFAC) has said that the green transition will have huge impacts on the public purse.

Speaking on RTÉ's Morning Ireland, Professor Michael McMahon said climate is going to permeate all aspects of society and life and it does have big economic implications.

He explained that as more people purchase electric vehicles, the revenue from motor tax will go down and that will be a loss that will have to be made up elsewhere.

IFAC warned that more tolls could be used to make up for lost tax revenue on electric vehicles (Rolling

"As we move away from the most polluting cars and towards, for instance a large stock of electric vehicles, that will reduce the amount of excise, VRT, VAT, motor tax, etc. Because these are things that are taxed more heavily on more polluting cars.

"So when we move away from more polluting cars in a good news way, there'd be a lot less revenue. So, we estimate that we're talking something like €2.5 billion by 2030 and even way more by 2040."

Prof McMahon said that the options to offset this loss include more tolls or congestion charges on vehicles.

He said that a strategy needs to be put in place to deal with this change.

"What we are pushing for now is a little bit of planning now so that we don't have to suddenly implement these things more drastically as we reach 2030 and beyond," he said.

"If we had plans, we people, companies, the government could all start the planning for it. But of course that does have implications for public spending.

"If they spend a whole lot more on infrastructure for sustainable energy, then we're going to have to think about where we get that and how we fund it."

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