Budget 2026 confirms that Ireland’s carbon tax will rise to €71 per tonne of CO₂. The higher rate takes effect for petrol and diesel from tomorrow and will extend to home heating fuels, including gas, oil, coal and briquettes, from 1 May 2026.
The Government expects the increase to generate around €121 million in additional revenue next year, rising to €157 million over a full year. Minister for Finance Paschal Donohoe said all revenue from the carbon tax will continue to be ring fenced to support measures that ensure the policy remains progressive. Funding will be directed towards social welfare supports to prevent fuel poverty, national retrofitting initiatives and programmes that encourage more sustainable farming practices.
Part of this allocation will include increased investment in the Warmer Homes Scheme, which provides fully funded energy upgrades for low income households.
Supports for Energy Transition and Business Investment
The €5,000 VRT relief for electric vehicles will remain in place until the end of 2026. Accelerated Capital Allowances for energy efficient equipment and for gas powered vehicles and refuelling infrastructure will be extended to 2030, offering businesses continued tax incentives for low emission investment.
Households generating renewable electricity will also benefit from an extended income tax disregard. The €400 exemption for income earned from selling surplus electricity back to the grid will continue until the end of 2028.
Major Investment in Water Infrastructure and Energy Security
Uisce Éireann will receive €1.4 billion next year to support new housing developments, upgrade water services and continue work on wastewater treatment facilities nationwide.
The Government has also committed €3.5 billion to the ESB and EirGrid to reinforce energy security and expand renewable energy capacity. This funding is expected to accelerate investment in grid upgrades and ensure the electricity system can accommodate rising demand from homes, businesses and data centres.
€1.1 Billion for Climate, Energy and Environment Programmes
The Department of Climate, Energy and the Environment has been allocated €1.1 billion for 2026. This includes:
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€558 million in carbon tax revenue for residential and community retrofit schemes
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Ongoing investment in retrofitting public buildings
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€209 million for climate action programmes and environmental leadership initiatives
A dedicated €82 million allocation has been prioritised to support a Just Transition in the Midlands. Projects include decarbonising rural bus services, assisting private operators in switching to electric vehicles, restoring wetlands and supporting wider biodiversity initiatives.
