Motorists will pay more for fuel from midnight as the annual carbon tax increase takes effect, with further price rises scheduled for January.
The Finance Act 2020 legislated for annual carbon tax increases until 2030 to support the government’s climate policy. This year’s scheduled increase will raise the tax to €71 per tonne of CO2 emitted, applying to diesel and petrol from midnight. The increase will extend to all other fuels from May 1, 2026.
Finance Minister Paschal Donohoe said the additional revenue from the tax increase is estimated at €121 million in 2026. The revenues will be ring-fenced to ensure the carbon tax policy is progressive, with funds spent on social welfare measures and initiatives to prevent fuel poverty and ensure a just transition.
This includes a socially progressive national retrofitting programme and funding to incentivise farmers to adopt greener and more sustainable practices.
Kevin McPartlan, CEO of Fuels for Ireland, which represents companies providing over half of Ireland’s energy supply, said the carbon tax increase means motorists will pay 2.5 cents more per litre from midnight. On January 1, changes to the Renewable Transport Fuels Obligation (RTFO) Scheme will add a further 2-3 cents per litre.
McPartlan expressed disappointment that the minister has not announced the establishment of an expert group to examine how taxation and state policies are driving up fuel prices. He said Irish motorists and businesses deserve an honest examination of why they pay some of Europe’s highest fuel costs.
Meanwhile, Donohoe announced that the €5,000 VRT relief for electric vehicles will be extended for another year until December 31, 2026, to increase electric vehicle adoption.
Friends of the Earth had called for electric vehicle subsidies for rural drivers with fewer transport options, along with a carbon levy on shipping, a tax on private jet flights and removal of excise and VAT exemptions on aviation fuel.