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The traditional goals of energy policy are to maintain a secure energy supply and to deliver the required energy at a minimum cost to consumers. In many developed countries, and in the European Union (EU) in particular, there is a third prominent goal: tackling climate change. In this paper we address a fourth challenge which is too often neglected in the formulation of energy policy–its distributional impact. The distributional effects are ignored in spite of their importance: energy policy can have a major effect in redistributing income between countries; between consumers and producers and between rich and poor households.

Many of the climate policies that influence Ireland are agreed at the EU level. Ireland has a role to play in helping to improve EU policymaking on climate change, for example by arguing for price instruments, which are more efficient, effective and transparent in achieving the goals of policy. If quantity based targets are to continue as the mainstay of climate and energy policy at an EU level, there must be safeguards put in place to ensure that they do not result in major transfers of wealth between EU members at a future date and that they do not unnecessarily increase the overall cost of climate action. For example, if Ireland is given an unrealistic target for emissions reduction, it could require actions that are either much more or much less expensive than for other EU countries, implying major transfers between Ireland and the rest of the EU at a future date. EU policy should ensure that there are appropriate mechanisms to prevent such possibly unpleasant surprises in the future.