Budget 2022 sustainability

Perspectives

Sustainability

Budget 2023

Key measures

Budget 2023 introduces a number of measures to protect our environment and help to move Ireland towards becoming a low carbon emitting economy as part of the process of meeting its climate change commitments. However, it sees a return to some of what have become the “traditional levers” in progression for this country’s climate agenda.

Carbon tax has increased in line with expectations set out in Finance Act 2020 by €7.50 per tonne, bringing the overall amount charged per tonne of carbon dioxide emitted to €48.50. This measure is estimated to raise an additional €114 million in 2023 and €151 million in 2024.

This additional revenue will be invested in energy efficiency related upgrades, social protection schemes and measures to incentivise farming in a more environmentally friendly way.

Furthermore, the current excise reduction of 21 cent per litre in respect of petrol, 16 cent per litre in respect of diesel and 5.4 cent per litre in respect of Marked Gas Oil (MGO), in addition to the 9% VAT rate for electricity and gas, will all be extended until 28 February 2023. These measure all in effect counteract the purposes of the carbon tax increases.

Who will be affected?

The increase of Carbon tax on fuel will add 2 cent per litre of petrol and diesel (VAT Exclusive). The reduction of National Oil Reserves Agency (NORA) levy, which is collected at a rate of 2 cent per litre (VAT exclusive), will result in an offset and the price at the pump will not go up as a result of taxes or levies.

The excise reduction in respect of petrol, of diesel and Marked Gas Oil, and the 9% VAT rate for electricity and gas, will provide a relief for both consumers and businesses.

When? What to do now?

The Carbon tax increase on petrol and diesel will apply from 12 October 2022 for diesel and petrol and from 1 May 2023 for all other fuels (coal, briquettes etc.) to allow for the winter heating season.

The excise reductions noted above will remain in place until 28 February 2023.

Our view

The government is keen to tackle climate change, aiming to achieve net zero emissions by 2050. However, due to recent international events and the consequential significant rise of the energy and fuel prices, the Irish Government has decided to intervene with temporary measures to mitigate short-term energy pressures whilst not addressing the creation of a sustainable and reliable indigenous energy industry. These contingent measures, although necessary from an economical perspective, will result in increased energy consumption and potentially a delay on the timeline of the above climate goals.

Much was anticipated of Budget 2023 given the keen focus of all citizens on climate change, however, the government has overlooked the lack of investment in renewable energies in Ireland, and the introduction of measures to stimulate the market to focus on climate change in a meaningful way, for short term measures. Further incentivisation regimes are needed in the renewable and energy storage spaces to ensure that Ireland, in the longer term, fulfils its potential as a net energy exporter and enables us to avoid being so heavily influenced by external factors in the future.

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