Dublin, October 3 – Ireland’s carbon tax, a decade-old levy on petrol, diesel, home heating fuels, and natural gas, has been a contentious issue as the government aims to reduce carbon emissions and encourage the shift to renewable energy. The tax, which currently stands at €71 per tonne of carbon for petrol and diesel, is set to increase annually, reaching €100 per tonne by May 2030.
Last year, the carbon tax on petrol and diesel rose as scheduled, but the corresponding increase for home heating oil, natural gas, and solid fuels was deferred to October 14 at a cost of €22 million. The Government cited rising fuel prices linked to the Middle East conflict as the reason for the delay.
Had the increase proceeded as planned, it would have added approximately 2 cents per litre to the price of kerosene, equivalent to €19.41 on a typical 900-litre fill, bringing the total carbon tax to €183.68. According to oilprices.ie, the average price of 500 litres of kerosene rose from about €500 in February to €815 in September.
In Budget 2027, to be delivered on Tuesday, the Government is expected to reduce the carbon tax rate on home heating oil amid calls from fuel protesters, farmers, Sinn Féin, and others to delay, reduce, or scrap the charge. Last year, the carbon tax generated approximately €1.2 billion in revenue, which the programme for government states will be used to fund social welfare measures, agri-environmental schemes, and retrofitting.
In Budget 2026, carbon tax revenues allocated €350 million to targeted social protection measures — a €44 million increase from 2025 — and €170 million to the Agri-Climate Rural Environment Scheme (ACRES), a €30 million increase. An additional €558 million was directed to SEAI grant schemes and initiatives, including the warmer homes scheme for retrofits, the national home energy upgrade scheme providing heat pumps, and the solar PV scheme.
However, in a report published in December, the Comptroller and Auditor General, Seamus McCarthy, stated that between 2020 and 2023, €1.36 billion in increased carbon tax revenue was allocated to specified expenditure programmes across five departments. According to McCarthy, only 61% of this sum could be verified as being spent on additional carbon tax measures. McCarthy described the ring-fencing or semi-ring-fencing of carbon tax revenues for transition purposes as a regularity problem, where, to a significant degree, the funds are not being delivered as intended.
Alex White, chair of the Climate Change Advisory Council, urged the Government to improve transparency around the use of carbon tax revenues to support a just transition away from fossil fuels, emphasizing the need for public awareness of how the money is spent and how it helps people.
Lisa Ryan, a professor in energy economics at UCD, commented that while the carbon tax is an easy lever for the Government to reduce fuel prices, it represents only a few cents per litre on petrol and diesel compared to overall taxes and observed price increases, calling it a bit of a red herring to focus on the carbon tax as a primary driver of fuel costs.
