Policy instruments

Governments reduce greenhouse-gas emissions through a mix of instruments that work in different ways. Some change prices, some set rules, some fund investment and some build institutions. This guide covers each type of instrument in the dataset. It explains why governments use it, how Ireland has applied it, its strengths and limitations, and how it is measured here.

Comparison of policy mechanisms
Mechanism	Main lever	Who decides how to cut emissions	Bindingness score	Typical OECD CAPMF indicators	Policies
Framework	Targets, budgets and institutions	Government, through subsequent plans	1.0	Climate advisory body; net-zero target	6
Pricing	Price per tonne of emissions	Each emitter	0.75	Carbon tax rates; ETS price and coverage; aviation pricing	3
Standards	Minimum performance of products, vehicles, buildings	Regulator sets the level; producers choose how	1.0	Building codes; MEPS; energy labels; vehicle CO₂ standards	9
Obligations	Quantified duty on market actors	Obligated firms	0.75 or 1.0	Energy-efficiency mandates	3
Practice regulation	Prescribed or restricted practices	Regulator	1.0	Fossil-fuel extraction bans	3
Deployment support	Guaranteed revenue for clean supply	Investors, within scheme rules	0.5	Feed-in tariffs; renewable auctions	2
Subsidies & finance	Lower cost of low-carbon investment	Households and firms (voluntary uptake)	0.5	Financing mechanisms for energy efficiency	6
Information & voluntary	Knowledge, networks, commitments	Participants	0.25	None in the CAPMF	2

Bindingness measures how compulsory an instrument is, on a fixed scale set by instrument type. Mandatory rules and statutory frameworks score 1.0; prices and statutory obligations 0.75. Financial incentives score 0.5; information or voluntary approaches 0.25.

Framework legislation and climate governance

Statutes and institutions that set long-term mitigation objectives, binding emission budgets, planning and reporting cycles, and independent scrutiny. They do not themselves prescribe what emitters must do.

Why governments use it

Climate policy requires commitments that outlast electoral cycles. Framework laws address this time-inconsistency problem by making targets statutory, creating recurring planning obligations and assigning accountability. Independent advisory bodies reduce information asymmetries between government and parliament.

In Ireland

The Climate Action and Low Carbon Development Act 2015 introduced national mitigation and adaptation plans and established the Climate Change Advisory Council. The Amendment Act 2021 made climate neutrality by 2050 a legal objective and set a 51% cut in emissions by 2030, compared with 2018. It also introduced five-year carbon budgets, sectoral emissions ceilings and annual Climate Action Plans.

Strengths

Raises the credibility and predictability of long-term policy
Coordinates action across sectors and departments
Creates regular accountability through reporting and review

Limitations

Acts indirectly, through the instruments it mandates
Effects are difficult to attribute separately from those instruments
Targets can be missed without automatic corrective measures

How this dataset measures it

Framework rows form layer L1 and are assigned to the cross-sectoral category. Implementation is proxied by OECD governance indicators (climate advisory body, net-zero target status). Several frameworks share the same indicator, so they are contextual and must never be added to instrument rows.

Policies of this type in the dataset

Climate Action and Low Carbon Development Act 20152015, Cross-sectoral
Climate Change Advisory Council2016, Cross-sectoral
Climate Action and Low Carbon Development (Amendment) Act 20212021, Cross-sectoral
Statutory climate-neutrality objective for 20502021, Cross-sectoral
Sectoral emissions ceilings2022, Cross-sectoral
Statutory carbon-budget programme2022, Cross-sectoral

Key references

Fankhauser, S., Averchenkova, A. and Finnegan, J. (2018). 10 years of the UK Climate Change Act. Grantham Research Institute on Climate Change and the Environment, London School of Economics.
IPCC (2022). Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report, Chapter 13: National and Sub-national Policies and Institutions. Cambridge University Press.
Nachtigall, D., Lutz, L., Cárdenas Rodríguez, M., Haščič, I. and Pizarro, R. (2022). The climate actions and policies measurement framework: A structured and harmonised climate policy database to monitor countries' mitigation action. OECD Environment Working Papers, No. 203. OECD Publishing, Paris.

Carbon pricing: taxes and emissions trading

Instruments that attach an explicit price to greenhouse-gas emissions. A carbon tax fixes the price and lets the quantity adjust; an emissions trading system fixes the quantity (the cap) and lets the price adjust. Emissions-based vehicle taxation applies the same logic to purchase and ownership taxes.

Why governments use it

Emissions impose an external cost that market prices do not reflect. A single carbon price corrects this. Each emitter cuts emissions wherever doing so costs less than the price. So the overall cut is achieved at the lowest total cost. It also rewards continuing innovation.

In Ireland

Ireland's carbon tax applies to fossil fuels outside the EU Emissions Trading System (ETS). It began on motor fuels in December 2009, at €15 per tonne of CO₂. Non-transport fuels followed at the same rate in May 2010. The rate rose to €20 on motor fuels in December 2011 and on other fuels in May 2012. After a long plateau it rose to €26 on motor fuels in October 2019 and on other fuels in May 2020. The Finance Act 2020 legislated annual increases of €7.50 towards €100 per tonne by 2030. Power stations and large industrial installations have been covered by the EU Emissions Trading System since 2005, and aviation since 2012. Vehicle registration tax and motor tax were rebased on CO₂ emissions in 2008.

Strengths

Cost-effective allocation of abatement across emitters
Continuous incentive to innovate
Generates revenue that can offset distributional effects

Limitations

Historical price levels were low relative to estimated social costs
Exemptions and free allocation weaken the signal
Short-run demand for fuels is price-inelastic
Regressive effects unless revenue is recycled

How this dataset measures it

Implementation uses OECD price indicators (carbon-tax rate by sector, ETS price, aviation pricing). Pricing rows are split into those inside the EU ETS and those outside it (covered by the EU Effort Sharing Regulation, ESR). Bindingness is scored 0.75 (price or statutory obligation).

Policies of this type in the dataset

EU Emissions Trading System2005, Electricity, Industry, Transport
Vehicle Registration Tax and Motor Tax Rebalancing2008–2020, Transport
Carbon Tax2009, Buildings, Industry, Transport

Key references

Baumol, W.J. and Oates, W.E. (1971). The use of standards and prices for protection of the environment. Swedish Journal of Economics, 73(1), 42–54.
Goulder, L.H. and Parry, I.W.H. (2008). Instrument choice in environmental policy. Review of Environmental Economics and Policy, 2(2), 152–174.
Martin, R., Muûls, M. and Wagner, U.J. (2016). The impact of the European Union Emissions Trading Scheme on regulated firms: What is the evidence after ten years? Review of Environmental Economics and Policy, 10(1), 129–148.
Kruse, T., Dechezleprêtre, A., Saffar, R. and Robert, L. (2022). Measuring environmental policy stringency in OECD countries: An update of the OECD composite EPS indicator. OECD Economics Department Working Papers, No. 1703. OECD Publishing, Paris.

Performance standards and mandatory labelling

Mandatory minimum energy or emissions performance for buildings, appliances, motors and vehicles, together with compulsory disclosure of that performance through labels.

Why governments use it

Energy use in durable goods responds weakly to prices because of imperfect information, limited attention and split incentives, for example between landlords and tenants. This is the so-called energy-efficiency gap. Standards remove the least efficient options from the market. Labels reduce search costs for buyers.

In Ireland

Part L of the Building Regulations has been tightened repeatedly for dwellings and other buildings, culminating in Nearly Zero Energy Building (NZEB) requirements. EU ecodesign and energy-labelling rules apply to appliances, lighting and electric motors. EU CO₂ standards set fleet-average targets for manufacturers’ newly registered passenger cars, first under Regulation (EC) 443/2009 and then Regulation (EU) 2019/631. They must also carry a CO₂ label at the point of sale.

Strengths

Predictable performance outcomes
Effective where price responsiveness is weak
Drive technology diffusion across the EU single market

Limitations

Apply mainly to new stock, so effects accrue slowly with turnover
Gaps between test-cycle and real-world performance
Rebound effects
Generally less cost-effective than an equivalent price signal

How this dataset measures it

Implementation uses OECD indicators for building energy codes, minimum energy-performance standards and labels. Successive editions of each standard are grouped into one policy family. Bindingness is scored 1.0 (mandatory rule). Assumed timing profiles use long ramps reflecting stock turnover.

Policies of this type in the dataset

Building Regulations Part L — dwellings (successive vintages)1991, Buildings
Mandatory energy labelling of appliances1995, Buildings
EU minimum energy-performance standards for appliances1996, Buildings
Mandatory energy/CO2 labels for new passenger cars1999, Transport
Building Regulations Part L — non-residential buildings (successive vintages)2005, Buildings
Energy Efficient Boiler Regulation2008–2022, Buildings
EU ecodesign requirements for electric motors2011, Industry
Transposition of Mobile Air Conditioning Directive (Directive 2006/40/EC)2011, F-gases
EU CO2 standards for new passenger cars (successive regulations)2012, Transport

Key references

Jaffe, A.B. and Stavins, R.N. (1994). The energy-efficiency gap: What does it mean? Energy Policy, 22(10), 804–810.
Allcott, H. and Greenstone, M. (2012). Is there an energy efficiency gap? Journal of Economic Perspectives, 26(1), 3–28.
Goulder, L.H. and Parry, I.W.H. (2008). Instrument choice in environmental policy. Review of Environmental Economics and Policy, 2(2), 152–174.

Market-based obligations

Legal duties on specified market actors, such as energy suppliers, fuel suppliers or large enterprises, to deliver a quantified outcome. Firms usually have flexibility in how they comply.

Why governments use it

Obligations combine a regulatory target with market flexibility. The obligated party finds the least-cost way to meet it, which is useful where many small, dispersed actions are needed, for example household energy savings.

In Ireland

The Energy Efficiency Obligation Scheme (2014), under Article 7 of the EU Energy Efficiency Directive, requires energy suppliers to deliver verified end-use savings. Biofuel support began with excise relief in the mid-2000s; the Biofuels Obligation Scheme took effect in 2010. Large enterprises must carry out energy audits every four years under S.I. 426/2014.

Strengths

Quantified, verifiable targets
Flexible and often low-cost delivery
Does not require public expenditure

Limitations

Additionality of reported savings can be uncertain
Compliance costs are passed through to consumers
For biofuels, life-cycle and land-use emissions may offset gains

How this dataset measures it

Most obligation rows are unmatched in the OECD framework and use assumed timing; audits use the OECD energy-efficiency mandate indicator. Bindingness is scored 0.75 for statutory obligations and 1.0 where the duty is a directly mandatory rule.

Policies of this type in the dataset

Deployment of biofuels in transport2005, Transport
Energy Efficiency Obligation Scheme (EEOS) — cross-sectoral2014, Buildings, Industry
Mandatory energy audits for large enterprises — industrial scope2014, Industry

Key references

Rosenow, J. and Bayer, E. (2017). Costs and benefits of Energy Efficiency Obligations: A review of European programmes. Energy Policy, 107, 53–62.
IPCC (2022). Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report, Chapter 13: National and Sub-national Policies and Institutions. Cambridge University Press.

Regulation of practices and activities

Rules governing how an emitting activity is carried out, or restricting it outright. Examples include landfill limits, prescribed agricultural techniques and restrictions on new fossil-fuel licensing.

Why governments use it

Some emissions come from many scattered farm or waste processes, or from long-lived investments. Here, setting rules on practices can be easier to monitor and enforce than pricing each tonne.

In Ireland

The EU Landfill Directive (1999/31/EC) set targets for diverting biodegradable waste from landfill, reinforced nationally by a landfill levy introduced in 2002. Low-emission slurry spreading (trailing shoe, trailing hose or injection) reduces ammonia losses and associated nitrous oxide. The Climate Action and Low Carbon Development (Amendment) Act 2021 restricted the granting of new petroleum authorisations. Existing authorisations were preserved, and their holders may seek successor authorisations under the statutory saving provisions.

Strengths

Directly targets the emitting process
Relatively easy to verify compliance
Addresses non-CO₂ gases that are hard to price

Limitations

Limited flexibility in how abatement is achieved
Enforcement over many small actors is resource-intensive
Supply-side restrictions may shift rather than reduce emissions

How this dataset measures it

Agriculture and waste practices have no direct OECD stringency indicator, so implementation uses assumed timing. Licensing restrictions use the OECD fossil-fuel extraction ban indicator. Bindingness is scored 1.0 (mandatory rule).

Policies of this type in the dataset

Landfill Directive (1999/31/EC)1999, Waste
Low emission slurry spreading2020, Agriculture
Restriction of new oil and gas exploration licences2021, Industry

Key references

IPCC (2022). Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report, Chapter 13: National and Sub-national Policies and Institutions. Cambridge University Press.
Goulder, L.H. and Parry, I.W.H. (2008). Instrument choice in environmental policy. Review of Environmental Economics and Policy, 2(2), 152–174.

Deployment support for renewable energy

Revenue or price support that guarantees returns to renewable generators and heat producers. Examples include feed-in tariffs, auctioned contracts for difference and renewable-heat supports.

Why governments use it

Early deployment lowers future costs through learning-by-doing, a benefit that investors cannot fully capture. Long-term revenue certainty also lowers the cost of capital for projects with high upfront costs.

In Ireland

Renewable electricity was first supported by the Alternative Energy Requirement competitions. The REFIT feed-in tariff schemes followed from 2006. The first Renewable Electricity Support Scheme (RESS) auction was held in 2020. RESS awards support through competitive auctions, while existing REFIT support continues under its scheme terms. Renewables supplied 41.0% of electricity generated in 2023. Renewable heat is supported through the Support Scheme for Renewable Heat and related measures.

Strengths

Rapid scale-up of clean supply
Lower financing costs through revenue certainty
Auctions reveal costs and drive prices down

Limitations

Costs recovered from consumers through levies
Poorly designed tariffs can over-compensate
Grid and planning constraints limit delivery

How this dataset measures it

The renewable-electricity portfolio uses the average of the OECD feed-in-tariff and auction scores as context. The two programmes can coexist, so neither is assumed to replace the other. Renewable heat has no OECD indicator and uses assumed timing. Bindingness is scored 0.5 (financial incentive).

Policies of this type in the dataset

Deployment of renewables in heating2005, Buildings, Industry
Renewable electricity deployment and support (REFIT/RESS portfolio)2005, Electricity

Key references

Couture, T. and Gagnon, Y. (2010). An analysis of feed-in tariff remuneration models: Implications for renewable energy investment. Energy Policy, 38(2), 955–965.
IPCC (2022). Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report, Chapter 13: National and Sub-national Policies and Institutions. Cambridge University Press.

Subsidies, tax allowances and finance

Grants, accelerated capital allowances and concessional finance that reduce the upfront cost of low-carbon investment by households, firms and communities.

Why governments use it

High upfront costs, credit constraints and high implicit discount rates deter investments that pay back over time. Subsidies also support markets and supply chains for new technologies.

In Ireland

SEAI delivers most programmes. They include home retrofit grants (Better Energy Homes) and free upgrades for households at risk of energy poverty (Warmer Homes). Others support community and business retrofits and, from 2011, electric vehicles. There is also the Accelerated Capital Allowance, a tax relief. The allowance lets companies deduct 100% of the cost of qualifying energy-efficient equipment in the year of purchase. In agriculture, liming supports improve soil conditions.

Strengths

Directly addresses capital barriers
Politically acceptable and visible
Can be targeted at low-income households

Limitations

Free-riding: some supported investments would have happened anyway
Uptake often skews to higher-income groups
Fiscal cost per tonne can be high

How this dataset measures it

OECD financing indicators give only general context for specific programmes (a partial match). Most programme rows therefore rely on assumed timing. Bindingness is scored 0.5 (financial incentive).

Policies of this type in the dataset

CHP Deployment - Public and Business sectors2006–2011, Electricity, Industry
Accelerated Capital Allowance for energy efficient equipment2008, Buildings, Industry
Better Energy Homes2011, Buildings
Electric vehicle deployment2011, Transport
Community Energy Grants2012, Buildings
Increased Liming2021, Agriculture

Key references

Allcott, H. and Greenstone, M. (2012). Is there an energy efficiency gap? Journal of Economic Perspectives, 26(1), 3–28.
Jaffe, A.B. and Stavins, R.N. (1994). The energy-efficiency gap: What does it mean? Energy Policy, 22(10), 804–810.
IPCC (2022). Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report, Chapter 13: National and Sub-national Policies and Institutions. Cambridge University Press.

Information, networks and voluntary agreements

Advice, energy-management networks, benchmarking and voluntary commitments that rely on engagement rather than legal compulsion.

Why governments use it

Organisations often lack the information, skills or management attention to identify cost-effective savings. Peer networks and structured energy management address these organisational failures at low public cost.

In Ireland

The Large Industry Energy Network (LIEN), run by SEAI, supports companies with high energy spend in energy management and annual reporting. The Public Sector Programme supports public bodies in meeting energy-efficiency targets, including a 33% improvement target for 2020.

Strengths

Low cost
Builds capability that supports other instruments
Encourages disclosure and benchmarking

Limitations

Participants self-select, so savings may not be additional
No enforcement if commitments are missed

How this dataset measures it

No OECD indicator applies, so implementation uses assumed timing. Bindingness is scored 0.25 (information or voluntary).

Policies of this type in the dataset

Large Industry Energy Network2000, Industry
Public Sector Programme2011, Buildings

Key references

Allcott, H. and Greenstone, M. (2012). Is there an energy efficiency gap? Journal of Economic Perspectives, 26(1), 3–28.
IPCC (2022). Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report, Chapter 13: National and Sub-national Policies and Institutions. Cambridge University Press.