Decarbonisation requires price support

In the real world, in order to properly deliver the fundamental change required, a set of financial supports based on grant aid would be needed for the capital expenditure required to build wind and solar farms and other renewable energy infrastructure. In addition to the establishment of these capital support mechanisms, a price guarantee for up to 25 years through a feed-in tariff system was also put in place. The result is that by the first quarter of 2025, over 38 per cent of Irish energy supply, as measured by Eirgrid, has come from renewable sources with wind power being the dominant source. The transition to electric vehicles (EVs) has also been primarily driven by direct price subsidies. After a lull in purchases by would-be EV car buyers, recent data shows renewed interest in owning an EV. Some of this surge in EV ownership may be related to the ongoing enthusiasm for solar panel installation, providing much of the energy required to power the cars. 

A policy gap

One can only wonder why, in the context of Ireland’s hugely important agri-food sector, there is absolutely zero sign of a similar approach to that sector’s decarbonisation/environmental challenges through food price supports. In the context of EU-wide discussions and proposals around the next Common Agricultural Policy (CAP) reform there is nothing other than wishful platitudes around the challenge of linking the increased costs associated with the EU's green transition to a substantive, realistic and sustainable food price support instrument. Perversely, while Irish/ EU food production is increasingly regulated and restricted, price recovery remains, to a great extent, at the whim of dominant, large grocery retailers. 

A critical contributor 

Let’s not forget that the Irish agri-food sector in 2024 delivered gross turnover of €34bn, with exports of €17bn while the value of farmgate output was €12bn. This shows a significant added-value element accruing at the post-production stages of the Irish food chain. Reiterating a point made several times previously, the Irish agri-food sector – across production, processing and exporting activities – supports 220,000 jobs directly and indirectly. The Irish agri-food sector has unique Irish economy multiplier impacts. Central Statistics Office figures show an expenditure multiplier of 2.0 in the dairy and beef sectors, meaning that the €8bn spent on local Irish raw materials generates a further €8bn across the rural economy. This multiplier impact significantly increases the real economic value of the sector beyond standard metrics like gross value added, which are in themselves subject to trade distortion issues as we know from studies of many of our foreign direct investment companies, especially in the pharma and electronic sectors. 

Additional challenges 

The combination of sectoral carbon emissions budgets and the impact of the Nitrates Directive have effectively placed production limits on livestock numbers in Ireland and, therefore, put a cap on processing throughput in the primary milk and beef processing sectors. Meanwhile global demand for Irish grass-fed dairy and livestock products is increasing. In addition to these output constraints, the individual sectors are being required to decarbonise their processing facilities at a combined cost of in excess of €1.6bn, this to be achieved with a low level of state aid supports and absolutely no price guarantee. This contrasts starkly with the generous capital supports and long-term price guarantees accorded to the energy production sector as it transforms from being a heavy fossil fuel user to a renewable energy producer. 

No facility for cost recovery

The market reality for the agri-food sector is that increases in cost which cannot be recovered by increased output (as set out above), will not be recovered in higher prices either, because the sector doesn't have selling power. This is in complete contrast to the vast majority of essential consumer purchases such as energy products, mobile phones, cars and pharmaceutical drugs. Price recovery levels within the Irish agri-food sector over the last 20 years have been non-existent due principally to retail buying power insisting on everyday low pricing in the grocery sector. Meanwhile, food production costs and regulatory constraints have increased incessantly, with the latest sustainable production constraints clearly adding further cost with no guarantee that consumer prices will reflect this increase in costs across the EU. There is total disconnection between production costs and product prices. This disconnect, through an absence of selling power, combined with ever increasing regulatory costs, means that food production in Ireland and the EU is being perversely undermined. An EU and Irish vox-pop is proselyting low carbon food consumption as the way of the future, while zero cost recovery is driving the replacement of local, highly regulated food with low cost, low regulation, non-EU alternatives. 

Not smart and not joined up

There is clearly acute political consideration here in terms of the broad wish to keep food affordable, but affordable meaning evermore imported, is not clever or sustainable and a fundamental change in policy is required very quickly if a real connection between agricultural policy and food prices is to be achieved. In Ireland, consumer price legislation is controlled by the Department of Enterprise not the Department of Agriculture. At the very least, there needs to be a dialogue established to determine a rational approach to both food affordability and a sustainable supply of indigenously produced food. Food security has been ignored in an age where global food supply chains are increasingly at risk from political, climatic and military challenges. Brussels provides an example of the policy disconnections and lack of coherence to deliver long term sustainable food supplies to European consumers. 

Agriculture policy is the competence of DG Agri

Food safety and regulation comes under the ambit of DG Sante, while DG Competition and DG Markets legislate for supermarkets and food pricing. DG Trade, in turn, does trade deals. Food production has been marginalised. This absence of joined-up policy implementation has effectively greenlighted retail buying power for the last 20 years, leaving food producers and processors with crumbs in pricing terms. This laissez faire approach to food pricing is also part of an outdated, globalisation cliché that proposed that the first world EU economy would specialise in ‘services’ while leaving food production to less developed economies. This strategy, seemingly being pursued without any consideration for climate/environmental impacts or real EU wide jobs impacts, is neither a smart or sustainable policy pursuit. Irish agriculture is currently delivering improved emissions and environmental impacts. Meaningful incentives/price guarantees will accelerate that delivery