Ireland to reduce carbon tax on home heating oil and gas

Ireland's finance minister has said the carbon tax on home heating oil and gas will be reduced, with no further increase planned for the rest of the current government's term. Simon Harris said the change applies to kerosene and natural gas, which he said have become a heavy burden for many families facing higher heating costs and limited alternatives. He said the decision was being taken in response to those pressures, adding that the government could not fully absorb the impact of the Middle East conflict.

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The current rate on both fuels is €63.50 per tonne of carbon dioxide, and it had been scheduled to rise twice before May 2027 to €78.50 per tonne. Under the new plan, both will instead be reduced to €48.50 per tonne. Mr Harris said the move means the carbon tax rate on these products will end up at less than half of what had originally been set out, marking a significant shift in the planned trajectory of the levy.

The announcement came alongside details of Budget 2027 spending for climate and energy measures. Mr Harris said €654.5m would be set aside for residential and community energy upgrade schemes delivered through the Sustainable Energy Authority of Ireland. Those schemes include retrofit grants, solar panel grants and a boiler scrappage scheme, which the government says are intended to deliver lasting reductions in household costs.

Minister for Public Expenditure and Reform Jack Chambers said the climate, energy and environment department would receive a €1.3bn budget. The budget also includes €170m for climate action and the environment, with €25m for the European Union's Just Transition programme in the Midlands. A further €155m is to go towards the development of a circular economy, including €47m for waste contamination sites.

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On water, the government said €2.3bn would be allocated to Uisce Éireann to speed up new and existing infrastructure, including water and wastewater connections linked to new homes. Officials said the funding is also meant to improve the capacity, resilience and sustainability of the water supply. The decision is politically significant because carbon tax is one of the main tools used to encourage lower emissions, but it also affects household energy bills directly.

Reducing the levy on heating oil and gas suggests the government is trying to balance climate policy with cost-of-living concerns. The move also comes at a time when energy prices remain sensitive for households that rely on these fuels and may not have easy alternatives. What remains unclear is how the reduced rate will affect the wider carbon tax path beyond the current government's lifetime, and whether other parts of the tax regime will change.

It is also not yet clear how the decision will be received by climate advocates or whether it will alter household behaviour in the short term. The next key detail to watch is how the Budget 2027 measures are implemented and whether the promised energy and water investments translate into lower costs and improved infrastructure.

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