The green tinge in Budget 2021 comes in the form of a carbon tax rise, VRT changes and funding for retrofitting.

For drivers, the carbon tax rise means fuel will go up from midnight tonight, while there will be tax breaks for green vehicles and higher VRT rates for polluting cars.

The Minister for Finance has announced that carbon tax will be increased by €7.50 per tonne of carbon dioxide.

Paschal Donohoe said that the charge will rise from €26 to €33.50 and will be applied to auto fuels from tonight and all other fuels from 1 May next.

He said that legislation will be provided in the Finance Bill to increase the tax every year by €7.50 up to 2029, and by €6.50 in 2030 to achieve €100 per tonne of carbon dioxide.

Mr Donohoe said that the rise in carbon tax is an important step "in our collective efforts to decarbonise our economy".

Last week, the Government published its new Climate Action Bill, which set a target to de-carbonise the economy by 2050 at the latest.

The Vehicle Registration Tax, which is to disincentivise people from buying large diesel cars and go green with electric vehicles, was also mentioned in the minister's Budget speech. 

Mr Donohoe said that VRT reliefs for Plug-in Hybrid Electric Vehicles and hybrids will be allowed to expire and relief for Battery Electric Vehicles will be allowed "taper".

He also said that he is "adjusting the Nitrogen Oxide [NOx] surcharge bands so that higher NOx emitting vehicles will pay more".

"It is essential that we take these measures now, as Ireland is way off course to meet our 2030 legally binding emission targets."


€17.75 billion spending package 'unprecedented' - Donohoe


The Minister for Public Expenditure confirmed that an additional €100 million of carbon tax revenues will be provided for investment in the energy efficiency of homes.

This is an 82% increase in funding compared with 2020.

Michael McGrath said it will greatly expand existing grant schemes, including the Warmer Homes scheme where waiting lists are too long.

Additional funding will also provide for new energy efficiency schemes, including the National Home Retrofit Scheme, which will support homeowners who want to upgrade the energy efficiency of their home to a B2 rating.

This will lower greenhouse gas emissions while also supporting thousands of additional jobs in the construction sector.

Minister McGrath said further resources are being provided to the department and Sustainable Energy Authority of Ireland (SEAI) to implement these changes.

He said investment in public transport is an essential part of our climate transition and our green recovery, and he allocated an additional €1bn in this area in 2021. 

The Programme for Government commitment in relation to the purchase of electronic vehicles is an important milestone in green public procurement, the minister said.

This will enable increased deployment of electric vehicles across the public service fleet, combating climate change while also delivering value for money.

"The climate crisis is no longer on the horizon. It is the great challenge of our generation. We must act now to climate proof our economy and society for future generations," he said.