Ireland Hikes Carbon Tax to €71 per Tonne to Fund Climate Action

Takeaways

• Ireland’s carbon tax will rise to €71 per tonne of CO₂, effective tomorrow for auto fuels and from May 2026 for all other fuels.
• The Government expects to raise €157 million annually from the increase, funding social and environmental programmes.
• The Budget 2026 also extends incentives for electric vehicles, energy efficiency, and renewable energy investments.

Ireland’s carbon tax is set to increase by €7.50, bringing the rate to €71 per tonne of CO₂ emitted. The change will apply to auto fuels from tomorrow and to all other fuels starting 1 May 2026, as part of the Government’s plan to gradually reach €100 per tonne by 2030.

The move, outlined in Budget 2026, aims to support the country’s climate action goals while funding social and environmental measures that promote a just transition toward a low-carbon economy.

Revenue and Allocation

The Government estimates the additional revenue from this increase will reach €121 million in 2026, rising to a full-year yield of €157 million. Minister for Finance Paschal Donohoe said that these funds will be “ring-fenced to ensure that the carbon tax policy is progressive.”

He noted that the revenue will support social welfare initiatives, prevent fuel poverty, and fund home retrofitting and green farming practices. Programmes such as the Warmer Homes Scheme, which provides free retrofits for low-income households, will receive increased allocations.

Read More: NCCS: Carbon Tax Discounts Support Net-Zero Plans, Not Continued Emissions

Climate and Energy Investments

The Department of Climate, Energy and the Environment will receive €1.1 billion in funding for 2026, including €558 million from carbon tax revenue to upgrade residential and community energy systems and retrofit public buildings.

A further €209 million is earmarked for climate action and biodiversity, with €82 million directed toward ensuring a Just Transition in the Midlands region. Planned projects include rural bus decarbonization, wetland restoration, and biodiversity support.

Support for Clean Energy and Transport

In addition, the €5,000 Vehicle Registration Tax (VRT) relief for electric vehicles (EVs) will be extended until the end of 2026. The Accelerated Capital Allowances schemes for energy-efficient equipment, gas vehicles, and refueling infrastructure will continue through 2030, encouraging businesses to adopt cleaner technologies.

The income tax disregard of €400 for households selling micro-generated electricity back to the grid has also been extended until 2028, promoting small-scale renewable energy generation.

Broader Infrastructure Commitments

The Government has allocated €1.4 billion to Uisce Éireann to enhance water infrastructure and support new housing developments. Additionally, €3.5 billion will go to ESB and EirGrid to strengthen energy security and accelerate the renewable energy transition.

Also Read: Alberta Carbon Tax Changes Let Companies Invest in Emissions Cuts

Criticism from Environmental Groups

However, not all stakeholders are satisfied. Deirdre Duffy of Friends of the Earth criticized the measures, saying this was “not a climate budget.” She argued that while there were efforts to reduce energy use, the plan failed to address polluters such as aviation and SUVs adequately, and neglected biodiversity protection.

Despite criticism, the Government maintains that the carbon tax increase and budget allocations represent a critical step toward meeting Ireland’s emissions reduction targets and ensuring a fair and sustainable transition to a greener future.

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Source: RTE