What does Budget 2023 mean for sustainability in Ireland?

Despite the tough current climate, Budget 2023 made clear that action against climate change remains a priority for the government. Deirdre Hogan explains

The Minister for Finance, Paschal Donohoe TD, delivered his Budget 2023 speech against a contrasting backdrop: the trilemma facing Irish businesses and individuals of energy, inflation and supply chains versus the recent positive reports on the exchequer finances.

While the Budget’s focus was on solving the short-term cost of living crisis, the Minister noted that “climate change is one of the key challenges of our time”, indicating that the climate crisis remains a priority for the Government.

Carbon tax

As expected, carbon tax was increased by €7.50 from €41 to €48.50 per tonne of CO₂. The carbon tax increase applies from 12 October 2022 for auto fuels but will be offset by a levy reduction, so we will not see a price increase. For all other fuels, carbon tax will increase from 1 May 2023.  

Due to the current energy crisis, the government opted to extend the nine percent reduced rate applicable to electricity to February 2023 and maintain the excise reduction introduced last spring on marked gas oil, petrol, and diesel of five, 16 and 21 cents respectively, providing for costs in the winter months when energy usage will be at its highest.  

The receipts from carbon tax are ringfenced to support wider sustainability initiatives and to support the costs of society and businesses in their transition from high carbon-emitting practices to more sustainable alternatives.

Carbon tax is expected to generate €623 million in 2023, and almost 50 percent of that is earmarked to go into improving the energy efficiency of houses.

Certain social welfare measures, such as Qualified Child Payment and the Fuel Allowance, will also be funded by the carbon tax. The Fuel Allowance is set to increase to €200 above the relevant State Pension Contributory, while those over 70 will see an increase in the Fuel Allowance to €500 for a single person and €1000 for a couple.

Agriculture

Farmers are set to receive €81 million to finance a new agri-climate rural environment scheme that will support up to 50,000 farmers who take action to improve biodiversity, climate, air, and water quality.

Individuals

Every household in Ireland will receive €600 in electricity credits over three €200 payments commencing pre-Christmas 2022.

Businesses

For businesses, a Temporary Business Energy Support Scheme is being introduced to assist businesses with their energy cost over the winter months.

Other sustainability-related measures

Other sustainability measures introduced include the announcement that €850 million will be spent on capital investment by the Department of the Environment, Climate and Communications in 2023 with over €337 million going towards grants for improved energy efficiency. This should fund over 37,000 home energy upgrades.

In transport, the reduction of fares by 20 percent and the 50 percent reduction in the Youth Travel Card will both be extended until the end of 2023.

Considering the current sustainability skills shortages in the labour market, the government provided for more than 2,000 apprenticeship places in areas around sustainable finance, green technology, and climate change.

The above measures are all welcome and positive. However, there is more work to be done to help increase the pace of our climate or sustainability ambitions.

Deirdre Hogan is Partner, Tax and Law from EY Ireland