Minister for Finance Paschal Donohoe has announced a €6 increase in the price of carbon as a first step towards the Government's commitment of increasing the price of carbon from €20 to €80 a tonne by 2030.

Mr Donohoe said it is the Government's intention - and his ambition - to increase this steadily to meet the 2030 target. 

The increase will apply from midnight tonight to auto fuels but the increase to other fuels will be delayed until May 2020 - after the winter heating season. 

The increase is expected to raise €90m in 2020. All of this will be ringfenced to fund new climate action measures, the minister said.

This will protect the most vulnerable in society, support sustainable mobility projects, deliver new agri environmental schemes and invest in the country's low carbon future, he added.

The Minister said that while Brexit is the country's most immediate economic risk, climate change is the "defining challenge" of our generation.

He said that "bold" decisions are needed on the country's investment priorities but also on taxation and regulation.

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AA Ireland says the increase in carbon tax will do very little to reduce Ireland's overreliance on the private car, criticising the move as little more than a Government cash-grab dressed up as a green initiative.

The announced increase in Carbon Tax is expected to add approximately 2c to a litre of petrol or diesel, equivalent to an increase of approximately €36 per annum in fuel costs for a typical motorist.

However, the AA warned that the increase alone will do little to encourage commuters to leave the car at home on its own and Government must now follow through on plans to invest in sustainable transport, particularly in rural areas.

€20m package for the Midlands

Mr Donohoe said that climate disruption is already impacting jobs, especially in the Midlands,  with the potential closure of Bord na Mona and ESB power stations. 

To protect such workers, Mr Donohoe said he will use some of the extra carbon tax revenues next year to fund a package aimed at the midlands. 

€20m will be dedicated to the creation of a new energy efficiency scheme targeted, initially, at the social housing stock in the region, which will create "new sustainable employment" in the region.

He is also allocating another €5m for peatland rehabilitation - a 250% increase - which will support the reduction of greenhouse gas emissions and enhanced bio-divisity.

A new dedicated "Just Transition Fund" will also be created. This will be devoted to priorities identified by local communities and €6m will be available for this fund next year.

Diesel surcharge to be replaced by nitrogen oxide emissions-based charge

In other climate related tax changes, the Finance Minister said that the 1% diesel surcharge - introduced last year - will be replaced by a nitrogen oxide emissions-based charge.

This will apply to all cars registering for the first time in January.

Mr Donohoe said the surcharge reflects the "detrimental effect" of emissions on the environment and will have a particular impact on older and more polluting cars. 

Under Budget 2020 measures, the Minister said he will also extend the benefit in kind zero rate on electric vehicles up to 2022 and extend VRT reliefs for conventional and plug-in hybrids to 2020.

He said he will also provide additional relief through the diesel rebate scheme to hauliers to compensate for the increased cost of fuel.

The Society of the Irish Motor Industry said it was relieved that Paschal Donohoe had not increased VRT for new cars in Budget 2020. 

SIMI's director general Brian Cook said the replacement of the 1% diesel surcharge introduced last year on new cars with a nitrogen oxide (NOx) emissions-based charge to all passenger cars registering for the first time from January was a welcome announcement. 

"The NOx charge will impact on older higher emitting cars which, unlike last year's diesel surcharge, will penalise older cars with higher levels of pollutants. The Minister has recognised that newer vehicle technology is cleaner and better for the fleet," Mr Cooke said.