The Programme for Government commits to additional spending of €9.5bn raised through increases in the carbon tax over the period from 2021 to 2030.

This figure is based on estimates of the additional revenue that will be collected by raising the tax per tonne for carbon dioxide emissions to €100 throughout this period.

The funds raised through increases in the carbon tax are ringfenced and spent in the following three areas:

  • Targeted social welfare and other initiatives to prevent fuel poverty and ensure a just transition.
  • A socially progressive national retrofitting programme.
  • Measures to encourage and incentivise farmers to farm in a greener and more sustainable way.

This year, however, a far greater than expected proportion of the newly available carbon tax receipts were allocated to targeted social welfare initiatives.

Read more: Expert says carbon tax moves people to use cleaner fuel

This enabled the Government to increase the weekly fuel allowance by €5 immediately from midnight on Budget day this year compared to an increase of just €3.50 almost six months after Budget day last year.

The funding required for this, and some related protective welfare measures, came about because the new sustainable and green farm initiatives, expected to be funded this year from the carbon tax, are part of the Common Agriculture Policy Reforms currently being negotiated and so have not yet been finalised.

This freed up €49 million from the €174 million to be raised in 2022 by the €7.50 increase in Carbon tax announced in the Budget. That money was instead spent on improved protective social welfare measures.

The Minister for Public Expenditure and Reform Michael McGrath said that the impact of the improved welfare measures cancelled out the impact of the increase in carbon tax for the poorest 40% of households and, in net terms, it had in fact left the bottom 30% of households better off.