Friday, 10 October 2025
As part of Budget 2026, the Irish Government has confirmed that Ireland’s carbon tax will increase by €7.50, bringing the total to €71 per tonne of CO₂ emitted. The change will apply to auto fuels starting tomorrow, and to all other fuels from 1 May 2026. This increase is part of a legally mandated path […]
As part of Budget 2026, the Irish Government has confirmed that Ireland’s carbon tax will increase by €7.50, bringing the total to €71 per tonne of CO₂ emitted. The change will apply to auto fuels starting tomorrow, and to all other fuels from 1 May 2026.
This increase is part of a legally mandated path under the Finance Act 2020, which aims to raise the carbon tax to €100 per tonne by 2030, supporting Ireland’s efforts to meet its legally binding climate action targets.
A carbon tax is a charge placed on fossil fuels based on their carbon content. The idea is simple: the more carbon dioxide (CO₂) a fuel emits, the more tax is applied. It’s designed to encourage cleaner fuel use, reduce greenhouse gas emissions, and help fund climate action.
Minister for Finance Paschal Donohoe stated that all carbon tax revenue will be ring-fenced, ensuring the policy is progressive and socially fair. In 2026, the increase is expected to generate:
€121 million in additional revenue
€157 million annually once fully phased in
This funding will be used for:
Social welfare supports and measures to prevent fuel poverty
A national retrofitting programme, including fully funded upgrades under the Warmer Homes Scheme for low-income households
Incentives for farmers to adopt greener, more sustainable practices
The Department of Climate, Energy and the Environment has been allocated €1.1 billion for 2026, including:
€558 million (from carbon tax revenues) for residential and community energy upgrades
€209 million for the Climate Action and Environmental Leadership Programme, including biodiversity and decarbonisation initiatives
€82 million specifically for the Just Transition in the Midlands region, covering projects such as:
Rural bus route electrification
Support for private bus operators transitioning to EVs
Wetland restoration
Nature and biodiversity conservation efforts
The €5,000 VRT relief for electric vehicles is extended through 2026
The Accelerated Capital Allowance scheme for energy-efficient equipment and gas vehicles is extended through 2030
The €400 income tax disregard for electricity sold back to the grid from microgeneration is extended to 2028
€1.4 billion for Uisce Éireann to improve water infrastructure and support housing development
€3.5 billion allocated to ESB and EirGrid to boost energy security and speed up the shift to renewables
As of 2025, Ireland’s carbon tax at €71 per tonne is among the highest in the world, ahead of many EU countries. For comparison:
Sweden leads with a carbon tax above €110/tonne
Germany’s effective carbon price (combining EU ETS and national tax) is lower
France’s carbon tax is currently capped below €50/tonne due to public resistance
Ireland’s commitment to a rising carbon tax curve reflects strong alignment with EU climate goals and international climate finance standards.
While the measures signal strong government commitment to climate action, not all stakeholders are satisfied.
Deirdre Duffy of Friends of the Earth welcomed the energy efficiency measures but criticized the budget for:
Excluding nature and biodiversity as a central focus
Failing to target high-pollution sectors, such as aviation and SUVs
Lack of attention to retrofitting in rental properties, which remain vulnerable to energy inefficiency
The increase in carbon tax to €71 per tonne reflects Ireland’s continued commitment to climate action through taxation, social investment, and sustainable development. While the government frames the policy as progressive and environmentally necessary, concerns remain over its fairness, scope, and implementation, particularly around nature conservation and emissions from high-impact sectors.
Carbon tax increases tomorrow for auto fuels, and from May 2026 for all other fuels
Revenue will fund social protection, retrofitting, and agricultural sustainability
Budget 2026 commits €1.1bn to climate and environmental programmes
Critics argue the budget falls short on nature protection and targeting major polluters
Despite progress, several challenges remain:
Measuring impact: Ensuring carbon tax hikes actually result in emissions reductions, not just higher costs.
Policy coherence: Aligning tax policy with transport, housing, and energy subsidies (e.g. removing contradictory incentives).
Political sustainability: Maintaining public and political support as the tax rises further toward €100/tonne.
Industrial competitiveness: Balancing decarbonisation with economic competitiveness, especially for SMEs and exporters.
Ireland’s ability to meet its carbon budgets for 2026–2030 will depend not just on taxation, but also on regulatory action, technological innovation, and broad societal buy-in.
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