A taxing drive: carbon taxes increase

Oct 13, 2020

In a drive to decarbonise Ireland’s economy, the rate of carbon tax on auto fuels will increase by €7.50 from €26 to €33.50 per tonne/CO2 from midnight.  Budget 2021 will also include the largest ever budget for energy efficiency and retrofitting programmes, helping Ireland meet its international climate action commitments.

Driving the change

In a drive to decarbonise Ireland’s economy, the rate of carbon tax will increase by €7.50 from €26 to €33.50 per tonne/CO2 from tonight. This increase will be applied to auto fuels from tonight and all other fuels from 1 May 2021.

This will translate to a considerable increase of €1.30 to an average 60-litre full tank of petrol, and €1.51 to an average 60-litre full tank of diesel.  Legislation will be provided in the Finance Bill to increase the carbon tax each year by €7.50 up to 2029 and by €6.50 in 2030 to achieve €100 per tonne.

Minister Paschal Donohoe also announced that the additional revenue of €238 million raised from the increase in carbon taxes in 2021 will be ringfenced to protect those people most exposed to higher fuel and energy costs and to invest in new climate action. The combined proceeds of the 2020 and 2021 increases in the carbon tax are estimated at €238 million in 2021.

Funds secured under the Carbon Tax Investment Programme, will be used to fund just transition measures to support displaced workers and create new opportunities. Specifically, a €20 million fund for Pilot Environmental Programmes in Agriculture to support farmers in lowering their carbon footprint, improving biodiversity, and protecting air and water quality is a part of the plan.

Increasing energy efficiency

Budget 2021 will include the largest ever budget for energy efficiency and retrofitting programmes. In order to further enhance energy efficiency, the accelerated capital allowances for energy efficient equipment is being extended for three years to 31 December 2023. The estimated annual cost of this measure is €4 million. This extension comes after a review of the scheme. The energy efficiency criteria for the scheme will be re-assessed in 2021 to ensure the categories of equipment availing of the scheme remain appropriate and reflect the most up-to-date efficiency standards.

In order to qualify, the equipment must be included in the list of energy-efficient equipment maintained and published by the Sustainable Energy Authority of Ireland (SEAI) in order to qualify under the scheme. The full 100 percent of the capital expenditure incurred on such equipment can be claimed for the year in which the equipment is first provided and used. The scheme is provided for under Section 285A of the Taxes Consolidation Act 1997.