Dáil Éireann Debate, Thursday - 9 October 2025
136. Deputy Ken O'Flynn asked the Minister for Finance the projected reduction in greenhouse gas emissions expected to result from the five cent increase in carbon-related taxes on motor fuels; and if he will make a statement on the matter. [54492/25]
View answer137. Deputy Ken O'Flynn asked the Minister for Finance whether there is a scheduled review mechanism to assess the social and economic impacts of the carbon tax escalator on motor fuels; and if he will make a statement on the matter. [54494/25]
View answer138. Deputy Ken O'Flynn asked the Minister for Finance whether his Department has undertaken an assessment of the adequacy of rural and inter-urban public transport alternatives prior to the forthcoming 5 cent increase in green taxes on motor fuels; and if he will make a statement on the matter. [54495/25]
View answer139. Deputy Ken O'Flynn asked the Minister for Finance whether his Department has estimated the expected cost increase for daily commuters arising from the fuel tax rise, and whether a measurable modal shift away from private car use is anticipated; and if he will make a statement on the matter. [54496/25]
View answer160. Deputy Ken O'Flynn asked the Minister for Finance the expected annual revenue yield from the forthcoming five cent increase in carbon-related taxes on motor fuels; and whether this revenue will be ring-fenced for climate mitigation or general exchequer use; and if he will make a statement on the matter. [54487/25]
View answer161. Deputy Ken O'Flynn asked the Minister for Finance whether his Department has carried out a socioeconomic impact assessment of the forthcoming increase in green taxes on petrol and diesel, specifically regarding rural motorists, low-income households, and small businesses; and if he will make a statement on the matter. [54488/25]
View answer162. Deputy Ken O'Flynn asked the Minister for Finance the offsetting measures that are being considered for the commercial road haulage, taxi, and agricultural sectors following the forthcoming five cent increase in green taxes on motor fuels; and if he will make a statement on the matter. [54489/25]
View answer163. Deputy Ken O'Flynn asked the Minister for Finance where Ireland ranks among EU member states in terms of total excise duty and carbon tax applied per litre of petrol and diesel; and if he will make a statement on the matter. [54490/25]
View answer164. Deputy Ken O'Flynn asked the Minister for Finance if his Department has modelled the inflationary effect of the forthcoming carbon-related increase in motor fuel prices on consumer goods and transport costs; and if he will make a statement on the matter. [54491/25]
View answerI propose to take Questions Nos. 136, 137, 138, 139, 160, 161, 162, 163 and 164 together.
The Carbon Tax is an environmental tax on fossil fuels based on the polluter pays principle.
Finance Act 2020 legislated for annual increases to the carbon tax of €7.50 up until 2029 and €6.50 in 2030, when the rate will reach €100 per tonne of carbon dioxide. This multi-annual rate trajectory provides a clear long-term signal to industry and society alike that our future involves a move away from fossil fuels. By maintaining the trajectory of annual carbon tax rate increases, our commitment to transitioning to a carbon neutral economy is reinforced.
A €7.50 increase in Carbon Tax will increase the price of diesel by approximately 2.5 cents and of petrol by approximately 2.1 cents per litre, inclusive of VAT. The excise component of Mineral Oil Tax (MOT) is not changing and therefore this is the extent of increases to auto fuel taxes in this years budget.
The additional revenue arising from the carbon tax increase is estimated at €121 million in 2026 and a full-year additional yield of €157 million.
The Programme for Government committed to continue with the planned Carbon Tax increases, aligning with recommendations from the Climate Change Advisory Council and scientific experts, and to using the resulting revenues raised to support climate action measures and to ensure the most vulnerable are protected from unintended impacts of the tax increase. This includes funding for retrofitting and agri-environmental schemes, alongside targeted social welfare and other initiatives to prevent fuel poverty and ensure a just transition. These measures are designed to be progressive.
To give effect to the Programme for Government commitment to protect the vulnerable, a targeted package of social protection interventions has been developed, which is informed by ESRI research that was commissioned to address this issue specifically.
In Budget 2026, a total of €1,114 million of carbon tax revenue is being allocated to climate measures and to ensure the most vulnerable are protected from unintended impacts of the tax increase. This is an increase of €163 million on the amount allocated in Budget 2025.
This includes allocations of €558 million to fund retrofit and energy efficiency schemes, €173 million to incentivise farmers to farm in a greener and more sustainable way, and €20 million to support sustainable mobility. In addition to climate mitigation, €350 million has been allocated to social protection interventions to ensure the most vulnerable in society are protected from the impacts of the tax.
Measures, relevant Departments, and the proportional allocation for each is outlined in tabular form below:
|
Departments |
Measures Funded |
2026 Total Allocation (€) |
2026 Additional (€) |
2025 Total Allocation (€) |
|
DCEE |
Residential & Community Energy Efficiency |
558 |
+89 |
469 |
|
|
Green Climate Fund |
2 |
|
2 |
|
|
Just Transition Fund |
6 |
|
6 |
|
DSP |
Targeted Social Protection Interventions |
350 |
+44 |
306 |
|
DAFM |
Incentivising Green and Sustainable Farming |
170 |
+30 |
140 |
|
|
Green Agricultural Pilots |
3 |
|
3 |
|
D/Transport |
Greenways/ Urban Cycling |
9 |
|
9 |
|
|
EV Charging infrastructure |
3 |
|
3 |
|
|
Providing Grants for EVs |
8 |
|
8 |
|
DHLGH |
Peatlands Rehabilitation |
5 |
|
5 |
|
Total |
|
1114 |
+163 |
951 |
The Department of Public Expenditure, Infrastructure, Public Service Reform and Digitalisation issue an annual publication on Budget Day titled ‘The Use of Carbon Tax Funds’, which contains further detail on these allocations, and includes information on the programmes funded from these amounts. All previous versions of this report are available on their website as well as the budget.gov.ie website.
Analysis undertaken using SWITCH, the ESRI tax and benefit model, to simulate the impact of the carbon tax increase and the compensatory welfare package estimates that the net impact of the combined measures is progressive. Half of households are better off due to the measures part-funded by additional carbon tax funds, with households in the bottom four income deciles benefitting the most.
As regards offsetting measures for the agricultural sector, reduced MOT rates apply to fuels used for other purposes such as in agricultural tractors and machinery, as well as for heating. Diesel that is supplied at a reduced MOT rate must be marked with prescribed fiscal markers and is referred to as marked gas oil (MGO), or green/agri/farm diesel. Reduced MOT rates are significantly lower than standard rates, as illustrated in the table below which includes current MOT rates per 1,000 litres for auto-diesel and MGO.
|
Fuel |
Non-carbon component |
Carbon component |
Total MOT |
|
Auto-diesel |
€425.72 |
€190.04 |
€615.76 |
|
MGO |
€47.36 |
€172.14 |
€219.50 |
In addition to the reduced MOT rate on MGO, section 664A of the Taxes Consolidation Act 1997 provides relief for expenditure relating to carbon tax on farm diesel (MGO) incurred by any person carrying on a trade of farming. In computing profits of a farming trade, a farmer may claim an income tax or corporation tax deduction that is equal to the difference between the amount of carbon tax paid and the amount that would have been paid if calculated at the rate in place on 30 April 2012, i.e. €41.30 per 1,000 litres. The farmer is also entitled to claim a deduction for expenditure on the farm diesel. Further information on the carbon tax relief is available on Revenue’s website at www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-23/23-01-36.pdf.
With regard to the horticultural sector, heavy oil (MGO, kerosene, and fuel oil) and liquefied petroleum gas (LPG) used for qualifying purposes in horticultural production or mushroom cultivation are relieved from the MOT carbon component. In addition, a full relief from Natural Gas Carbon Tax applies to natural gas used for these qualifying purposes.
Furthermore, €173 million in Carbon Tax funding is being allocated to encourage and incentivise farmers to farm in a greener and more sustainable way (agri-environmental schemes) in 2026. This is a €30 million increase in funding year-on-year.
This increased funding will be used to fund the Agri-Climate Rural Environment Scheme (ACRES) – detailed in Ireland’s Common Agricultural Policy (CAP) Strategic Plan 2023.
With regard to the transport sector, the Diesel Rebate Scheme (DRS) is a State aid which provides a partial rebate of MOT to qualifying road haulage and bus transport operators, when the average retail price of auto-diesel exceeds €1.00 per litre excluding VAT. The DRS operates on a sliding scale basis, whereby the repayment rate increases gradually as the retail price increases, up to a maximum repayment rate of 7.5 cents per litre. The DRS repayment rate has been at the maximum level for almost four years.
In addition to tax measures that apply to certain fuel uses and/or users, MOT law provides for relief from carbon taxation for biofuels and vehicle biogas. This means that biofuels and vehicle biogas are not impacted by carbon tax increases and the lower effective MOT rates on these fuels apply across all sectors and uses.
These measures are designed to support industry and to help mitigate against any unintended price impacts on consumer goods and transport costs.
As regards the adequacy of rural and inter-urban public transport alternatives, while I appreciate that those people living in rural Ireland do not have the same public transport alternatives as those living in our cities, to suggest that there is no or totally inadequate public transport available in rural Ireland is not the case.
As set out in the National Development Plan, the Government is committed to strengthening rural economies and communities and enhancing regional accessibility, with a range of investments in new and existing public transport infrastructure.
In addition, the Connecting Ireland Rural Mobility Plan is a major five-year national public transport initiative with the aim of increasing public transport connectivity, particularly for people living outside the major cities and towns.
Since it began in 2022, more than 175 new and enhanced services have been implemented connecting over 240 towns and villages to the public transport network. These routes have provided 41 Connections to higher education facilities, 61 connections to healthcare facilities, and 71 connections to existing rail services.
Approximately 600,000 people now have access to these new or enhanced bus services.
Almost 8 million passenger journeys were recorded across Connecting Ireland services in 2024. Where Connecting Ireland services have been implemented patronage has increased 38% from 2023 to 2024, indicating a measurable modal shift away from private car use.
In the new Programme for Government, Securing Ireland's Future, this Government has committed to increasing Local Link services in rural areas to better connect villages, towns and cities, and to continue the roll-out of Connecting Ireland and investment in new town services.
Moreover, the Government is making public transport more accessible in rural and regional areas for disabled and older people by retrofitting older transport infrastructure and facilities.
Funding under the Public Transport Retrofit Programme increased 67% in 2025 compared to 2024.
The Programme is funding the installation of accessible bus stops in regional areas, bus and train station accessibility improvements, and increasing the number of wheelchair taxis.
The Deputy had also asked where Ireland ranks among EU Member States in terms of total excise duties on fossil fuels, full data is not available to assess Ireland’s ranking in this regard. However, data is available to assess Ireland’s ranking inclusive of all taxes and charges, including VAT and excise duties.
In terms of the total tax applied per litre of diesel, Ireland ranks second in the EU as recorded on 29 September.
In terms of the total tax applied per litre of petrol, Ireland ranks sixth in the EU as recorded on 29 September.
More information and weekly updates on prices of petroleum products in all EU countries is available on the European Commission’s website: energy.ec.europa.eu/data-and-analysis/weekly-oil-bulletin_en
In terms of the projected reduction in GHG emissions expected from the carbon tax, it is important to note that the carbon tax does not operate in isolation but is complementary to a suite of climate action policy measures including the national retrofit programme, uptake of Electric Vehicles, investment in public transport, uptake of environmentally friendly agricultural practices, the EU ETS among others. As such, it is not possible to isolate the specific impact of the carbon tax on emissions reductions.
However, overall, the Environmental Protection Agency report that emissions in the transport sector decreased by 1.2 per cent in 2024 compared with 2023.
Finally, the Deputy should note that taxation of energy products is reviewed on an ongoing basis. Consideration of policy options has due regard to all relevant factors including the wider economic context, global energy market activity, consumer and business impacts, climate commitments and exchequer impacts.
The taxation of petroleum-related products was most recently examined in the Tax Strategy Group paper on ‘Energy, Environmental and Vehicle Tax’, published by the Department of Finance in July. The Tax Strategy Group papers are published in advance of the Budget to facilitate informed discussion. They form part of the overall Budgetary and Finance Bill process which includes the National Economic Dialogue, the Budget Oversight Committee and the provision of pre-Budget submissions and engagement with specific groups and individuals. Tax policies relating to fossil fuels are kept under ongoing review by the Department of Finance.
