Dáil Éireann Debate, Wednesday - 19 November 2025
81. Deputy Naoise Ó Muirí asked the Minister for Climate, Energy and the Environment the status of Ireland’s derogation from ETS2; and the way in which the scheme will be coordinated with the national carbon tax to avoid duplication of costs for consumers. [64055/25]
View answerETS2 extends emissions trading to sectors of the economy that are currently covered by Ireland’s domestic carbon tax regime. Therefore, participation in trading in ETS2 allowances would effectively give rise to double taxation. To avoid such double taxation, a derogation was agreed in Directive (EU) 2023/959. The derogation allows for a Member State, with a carbon tax equivalent or higher than the average ETS2 auction rate, to be exempted from the obligation on regulated entities to surrender ETS2 allowances for each of the years 2027 to 2030. The derogation requires initial approval by the European Commission, and annually thereafter. Ireland has sought this initial approval from the European Commission.
As part of the process of qualifying for the derogation, the Finance Bill 2025, introduced amendments to certain carbon tax reliefs to ensure that Ireland's national carbon taxation regime is aligned with the scope of ETS2. The Commission’s assessment of the derogation notification is expected shortly.
Therefore, in the event of the application of the derogation as anticipated, regulated entities will not be obliged to hold and surrender allowances and will not be expected to incur any significant additional costs that may be passed on to end-users and consumers. Any additional costs for the regulated entities would be limited to the administrative costs of monitoring and reporting fuel usage.
It should also be noted that agreement was reached at the Environment Council on 5 November 2025 that a legislative provision would be introduced to postpone the entry into application of ETS2 by one year, from 2027 to 2028.
