Carbon Tax in Ireland: How Does It Work?
In 2024, the carbon tax is set at €63.50 per tonne of CO₂ produced. The rate was increased from €56 in the 2025 Budget. The tax is aimed at reducing Ireland's use of fossil fuels by encouraging people to make more environmentally sustainable choices when it comes to their use of gas, petrol and diesel, home heating oil and other carbon emitting fuels.
How Much Is the Carbon Tax in Ireland?
In 2024, the carbon tax is levied at €56 per tonne of CO₂ produced.
It was previously set at €48.50 per tonne of CO₂ produced but was increased in Budget 2024, by €7.50 in line with the annual rate increase.
The carbon tax is set to increase this year as part of the Budget 2025 in October by €7.50 to €63.50 in line with the annual rate increase.
The Carbon Tax has increased at a rate of €7.50 per year since it was written into legislation in 2019 and is set to reach €100 by 2030.
From 2030, the annual rate of increase will drop to €6.50 per year.
How Much Does the Carbon Tax Add to My Bills?
The Carbon Tax is placed on all carbon emitting fuels, primarily gas, with a breakdown of the average cost found below:
| Fuel | Additional Cost (including VAT) |
|---|---|
| Natural Gas | €122 per year |
| Petrol and Diesel | 15c per litre |
| Bag of coal | €5.88 per 40kg bag |
| Peat Briquettes | €1.27 per bale |
| Home heating oil | €141 per 900 litres |
How Much Does the Carbon Tax Cost Me on My Gas Bill?
Gas providers currently charge roughly €0.1 cent per kWh of gas consumed to cover the carbon tax.
For the average household, which consumes 11,000 kWh of gas per year, that's an extra €122 a year, or €10.16 a month (including VAT).
The carbon tax is not applied to electricity bills, but this is compensated by PSO levy, which is applied to electricity bills.
How Much Does the Carbon Tax Cost Me on Petrol and Diesel?
The carbon tax adds 12.96c to a litre of petrol and 14.99c to a litre of diesel.
Given that the average Irish motorists drives around 17,000km in a petrol car and 24,000km in a diesel vehicle, the carbon tax is adding €140 a year for petrol drivers and an additional €166 a year for diesel drivers.
The aim of the Carbon Tax placed on vehicle fuel is to encourage motorists to switch to electric vehicles in order to reduce overall CO₂ emissions.
Have a look at our electric vehicles in Ireland guide to see how switching to an electric vehicle can help you avoid paying additional costs on your transport needs.
How Much Does the Carbon Tax Cost Me on Other Fuels?
The carbon tax is also applied to other fuels, with an additional cost of:
- Home heating oil - €141 per fill.
- Coal - €5.88 per 40kg bag.
- Peat briquettes - €1.27 per bale.
Similar to transport fuel, the carbon tax is aimed at encouraging people to move away from fossil fuels as a source of home heating towards more sustainable methods.
Examples of alternatives to fossil fuels include:
- Heat pumps
- Window and doors upgrades
- Wall insulation
- Attic insulation
- Heating system upgrades
- Heating control installation
Given that the carbon tax is only going to increase year-on-year, it is worth considering investing in some of these home heating upgrades to reduce consumption of fossil fuel energy.
Grants are available from the SEAI to help cover the cost of these home heating upgrades.
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What Is the Carbon Tax in Ireland?
The carbon tax is a tax applied to fossil fuels, such as gas, coal, oil, petrol, diesel and peat.
These fuels emit carbon dioxide, or CO₂, which is one of the main culprits behind global warming and extreme heat waves since it reflects heat and traps it in the Earth's atmosphere.
The theory behind a carbon tax is that levying charges against users of carbon-emitting fuels will do the following:
- Act as a financial disincentive to using fossil fuels as an energy source.
- Encourage an uptake of renewable energy.
- Provide financing for offsetting CO₂ emissions and investing in renewable technology.
The carbon tax is one of the factors why Irish gas bills have become so high in recent years when compared with European gas prices, and why it is more important than ever to compare the market in order to get the cheapest deal possible.
Is The Carbon Tax Reinvested?
The revenue earned from the carbon tax has increased significantly since it was introduced over 10 years ago.
By the end of 2023, almost €5.288 billion in carbon tax revenue had been collected since its introduction.
The Programme for Government commits to an additional €9.5 billion of spending using the revenue collected from the carbon tax.
This is allocated towards:
- €5 billion invested in energy efficiency initiatives in residential and community sectors.
- €4.5 billion will be used to boost government spending.
- An additional €1.5 billion will also be made available to fund schemes aimed at supporting the agricultural sector.
Revenue will also be used to fund various projects aimed at reducing Ireland's carbon footprint, such as:
| Department | Project Funded | 2024 Allocation |
|---|---|---|
| Transport | Greenways and Urban Cycling | €9 million |
| Transport | EV Charging Infrastructure | €3 million |
| Transport | Providing Grants for EVs | €8 million |
| DHLGH | Peatlands Rehabilitation | €5 million |
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