Dáil Éireann Debate, Thursday - 18 December 2025
187. Deputy Naoise Ó Muirí asked the Tánaiste and Minister for Finance his views on the way the taxation system could help citizens mitigate risks with regard to the impact of climate change, as identified in the Climate Change Risk Matrix, as published by his Department; and if he will make a statement on the matter. [69920/25]
Amharc ar fhreagraIreland’s tax system supports efforts to transition to a low carbon economy, and, over the past number of years, several tax reforms have been implemented to encourage behavioural change and support emissions reductions, including carbon tax increases and vehicle tax reforms.
Government is committed to a carbon tax regime that is progressive, with revenue raised from increases in the carbon tax since 2020 being allocated for expenditure on climate action and the Just Transition. The additional revenue raised by increasing the carbon tax is ring-fenced and used to enable transitional changes and to provide targeted social welfare and other measures to prevent energy poverty. Consistently, internal Government analysis using the SWITCH model has found that the increases in the carbon tax have been progressive due to the increased social protection payments funded by the carbon tax.
The Government has allocated €1.1 billion to climate action measures and to ensure the most vulnerable are protected from the unintended impacts of the increase in the carbon tax. This is an additional €163 million on 2025’s allocation.
This €1.1 billion expenditure is comprised of:
• €566 million to the Department of Climate, Energy and the Environment for retrofitting programmes, Just Transition and ODA-Green Climate Fund (an additional €89 million on 2025);
• €350 million for the Department of Social Protection for targeted social welfare interventions ( an additional €44 million on 2025);
• €173 million for the Department Agriculture, Food and the Marine for green & sustainable farming measures (an additional €30 million on 2025);
• €20 million for the Department of Transport for continuation of carbon tax-funded programmes since 2020; and
• €5 million for the Department of Housing, Local Government and Heritage for continuation of carbon tax-funded programmes since 2020.
The existing vehicle tax structures in the State have a strong environmental rationale, with the more pollutant, fossil-fuelled cars paying higher rates of tax, while low emission cars are subject to the lowest rates of tax. The current policy approach aims to incentivise the uptake of zero to low emission vehicles, which will support the reduction in Ireland’s transport emissions, while also fostering a more sustainable transport network.
Electric vehicles (EVs) currently benefit from a number of tax incentives, including preferential rates of benefit-in-kind (BIK), Vehicle Registration Tax relief of up to €5,000, a low annual motor tax rate, and a BIK exemption on the installation of an EV charging facility by an employer at the home of a director or employee.
Government has also introduced several tax incentives to support home energy efficiency improvements. A zero rate of VAT applies to the supply and installation of solar panels on private dwellings, while heat pumps are subject to a reduced VAT rate of 9%. The accelerated capital allowances scheme also supports the uptake of energy efficient equipment, ensuring energy savings and reduced carbon emissions.
Overall, Ireland’s tax system supports climate resilience by incentivising the uptake of zero emission vehicles, lowering long-term energy costs, and supporting households most affected by increasing fuel and heating costs through targeted supports.
Tax policy measures and options with regard to behavioural change and emissions reductions are kept under review as part of the annual Tax Strategy Group and Budgetary cycle.
