To continue to incentivise the uptake of electric vehicles, Finance Minister Paschal Donohoe said he would extend the €5,000 relief for Battery Electric Vehicles to the end of 2023.

Mr Donohoe said he had made significant changes to the vehicle registration tax system in last year's Budget to strengthen the environmental rationale of VRT in line with commitments to cut emissions from road transport.

He said the structure of new car sales for this year compared to last year 2020 is evidence of the success of this approach, with an increase in vehicles registered at the lower end of the VRT scale.

From January 2022, the Minister said that a revised VRT table is being introduced.

The 20 band table will remain with an increase in rates, with a 1% increase for vehicles that fall between bands 9-12, a 2% increase for bands 13-15 and a 4% increase for bands 16-20.

Carbon tax to increase by €7.50

The Minister for Finance has confirmed that the carbon tax will increase by €7.50, as expected.

The Finance Act 2020 provided for annual increments in the carbon tax of that amount every year out to 2030.

In his speech, Paschal Donohoe referenced the challenge around energy supply and prices across the globe in recent months.

"New monies raised in this change will be invested in targeted social welfare initiatives to prevent fuel poverty and ensure a just transition.

"It is why the additional revenue from carbon tax will be used to invest in a socially progressive national retrofitting programme," he said.

He also announced that there would be a modest level of tax relief on personal income for households who sell surplus electricity that they generate back to the grid.

SIMI director general Brian Cooke said that Budget 2022 was a mixed bag for the motor industry and the motorist.

Brian Cooke said the increases in VRT on the back of Covid, Brexit, increased fuel taxes and the dramatic VRT changes in last year's Budget are hugely disappointing.

"These increases only add to the already heavy tax burden on new cars, and will serve to slow down the renewal of the fleet, acting as a barrier to reducing emissions," he added.

But SIMI welcomed the continuation of VRT relief for Electric Vehicles up to 2023, which it said will bring a degree of certainty to both consumers and the industry on the vital Electric Vehicle Project and will help increase EV sales over the next two years.

'Ramp up' in capital spending

The Minister for Public Expenditure and Reform Michael McGrath has said the National Development Plan, along with the upcoming Climate Action Plan and carbon budgets will set a path for Ireland to reduce its emissions by 51% by 2030.

In his budget speech, Minister McGrath said the evidence of the climate crisis is clear for all to see.

He said next year there will be a €700 million capital investment by the Department of the Environment, Climate & Communications.

He said this will be the start of a "ramp up" in capital spending that will see €12.9 billion of direct capital investment by that Department over the lifetime of the NDP.

Minister McGrath said €202 million of this funding will be spent in 2022 on supporting people to improve the energy efficiency of their homes.

He said this will support over 22,000 home energy upgrades.

Minister McGrath said that permanently reducing a household's energy needs is the best way to tackle energy poverty and help people struggling with high energy costs.

He said it will also reduce greenhouse gas emissions and create thousands of new jobs.

As a result, Minister McGrath said funding is being made available through the Department of Further & Higher Education to expand training programmes and apprenticeships in this area, to make sure workers can avail of these new jobs.

Minister McGrath said the money raised by the increase in carbon tax will be returned to the people of Ireland in a "progressive" manner.

He said an additional €174 million will be made available in 2022 for energy efficiency and to protect the most vulnerable in society.

"Households in the bottom four income deciles will see all of the cost of the carbon tax increase offset, with the bottom three deciles being better off as a result of these measures," he said.