In this week’s bulletin, read about how Budget 2022 aims to support the transition to a climate-neutral and circular economy and society with an allocation of €858 million to the Department of the Environment, Climate and Communications. Also covered are the measures announced in Budget 2022 to ‘green the tax system’.
€858 million allocated to the Department of the Environment, Climate and Communications
This year’s Budget 2022 allocated €858 million – an increase of 19% over 2021 – to the Department of the Environment, Climate and Communications. This allocation is broken down as follows:
- €368 million for Energy Transformation:
- €202 million from carbon tax revenue for residential and community retrofit schemes (over 22,000 home energy upgrades in total), with more than half for free upgrades for low-income households at risk of energy poverty
- €10m for the Solar PV scheme
- €31 million for energy efficiency and renewable energy schemes in businesses and the public sector. A new low-cost loan scheme for residential retrofitting will also be introduced. This part-Exchequer and part-EU funded scheme will enable credit institutions to offer loans at reduced interest rates – making energy upgrades more affordable
- increased resources in the department and its agencies will support the delivery of a second Renewable Electricity Support Scheme (RESS 2) auction, the first Offshore Renewable Electricity Scheme (ORESS), and to ensure continued security of electricity supply.
- €251 million to support connectivity and communications, including:
- €225 million to further progress the roll-out of the National Broadband Plan (NBP). An estimated 60,000 premises will be passed by the end of 2021, which is less than targeted. The government hopes that investment in 2022 will allow the number to grow to at least 130,000 by the end of 2022.
- €2.5 million for the National Cyber Security Centre.
- €152 million to support Just Transition, fund vital research and build capacity across the department and its agencies to lead and support Ireland’s response to the climate crisis:
- €34 million of funding will be available in 2022 for projects that are approved for EU and national Just Transition funds, in areas and sectors of the economy most impacted by the transition to net zero emissions
- €22 million will go towards the Bord na Móna Peatlands Rehabilitation Scheme in 2022
- €11 million will fund climate research to enable Ireland to meet its renewable energy targets and climate commitments, with funding ring-fenced to strengthen and enforce air quality regulations. In tandem with this, the department will develop Ireland’s first ever Clean Air Strategy.
- €98 million to support the transition to a Circular Economy and will protect natural resources, including waste management and geoscience research initiatives, supporting the implementation of the government’s Waste Action Plan for a Circular Economy, and conservation and protection of our inland fisheries (€3 million).
Commenting, Minister for the Environment, Climate and Communications, Eamon Ryan TD, said:
“Budget 2022 is about supporting our citizens as we begin the transition to a climate neutral, circular and connected economy and society…Cutting our emissions in half by 2030 is both a challenge and an opportunity. Today we are strengthening our capacity to do that in very practical ways."
More information about the allocation can be found on the Department’s website here.
‘Greening the Tax System’
In a drive to further decarbonise the economy and meet Ireland’s commitment to reduce carbon emissions by 7 percent next year, the rate of carbon tax on auto fuels will increase again this year by €7.50 from €33.50 to €41 per tonne of CO2 from 13 October 2021. Budget 2022 also amends both Vehicle Registration Tax rates and the accelerated capital allowance schemes to further encourage the transition to lower-emission fuels. The BIK exemption on electric vehicles is extended to 2025.
Carbon tax will rise by the same amount in every Budget until 2029, further increasing the cost of petrol, diesel and home heating fuels.
- A 60-litre tank of diesel will increase by an estimated €1.48 from 13 October and
- a similar tank of petrol will cost an estimated extra €1.28.
Home heating
The price of home heating oil, coal and peat will all increase from 1 May 2022.
- A 900-litre tank of home heating oil will cost €19.40 more
- a 40kg bag of coal will cost 89 cents extra and
- a 12.5kg bale of peat briquettes will go up by 20 cents.
- The cost of annual natural gas usage will increase by an average of €16.95.
Funds raised from these increases are intended to go towards funding an increase in the fuel allowance in addition to programmes aimed at reducing the State’s overall carbon footprint, including the better insulation of homes.
Electrical vehicles – BIK exemption extended
The BIK exemption where an employer makes a battery electric car (both new and used) available to employees has been extended until 2025. This exemption was due to end on 31 December 2022.
There will however be a tapering effect on the vehicle value. For BIK purposes, the original market value of an electric vehicle will be reduced as follows:
- by €35,000 for 2023
- €20,000 for 2024 and
- €10,000 for 2025.
Accelerated capital allowances scheme
Amendment for energy efficient equipment
The accelerated capital allowance scheme for energy efficient equipment, which allows the full cost of expenditure on qualifying energy efficient equipment to be deducted for tax purposes in the year of purchase, has been amended to disallow equipment that is directly operated by fossil fuels from qualifying.
Gas vehicles and refuelling equipment
Introduced in the Finance Act 2018, this scheme allows the full cost of expenditure on qualifying gas vehicles and refuelling equipment used for business purposes to be deducted from taxable profits in the year of purchase. The scheme, which is particularly focused on the heavy-duty land transport sector, was due to end on 31 December 2021 but has been extended until 31 December 2024.
Furthermore, in an effort to encourage the transition to lower-emission fuels, the scheme will be extended to include hydrogen powered vehicles and refuelling equipment.
Income from micro-generation of electricity
A tax disregard of €200 is being introduced for personal income received by households who sell residual electricity generated by them back to the grid.
Vehicle Registration Tax (“VRT”)
In order to reinforce the environmental rationale behind the VRT system, a revised vehicle registration tax table is being introduced from 1 January 2022. This will result in increases in the rates of VRT.
The 20-band table will remain; however, there will be:
- a 1 percent increase for vehicles that fall between bands 9-12
- a 2 percent increase for bands 13-15, and then
- a 4 percent increase for bands 16-20.
The €5,000 relief from VRT for battery electric vehicles is being extended to 31 December 2023.
You can find all of Chartered Accountants Ireland’s Budget 2022 coverage here.
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