Drivers and households face higher fuel bills with rise in carbon taxes

Government to earmark cash from carbon levy for specific initiatives, including easing fuel poverty

Budget 2025: The Department of Environment, Climate and Communications, led by Green Party Minister Eamon Ryan, will be a big beneficiary of the tax. Photograph: Niall Carson/PA Wire

Following Budget 2025, drivers and households will face higher fuel bills next year as the Government boosts carbon taxes as part of its ongoing campaign against climate change.

The charge levied on fossil fuel use will rise to €7.50 for every tonne of carbon dioxide produced, from October 9th for transport, and from May 1st, 2025, for home heating.

Motorists will pay an estimated €10.84 in carbon tax on 60l of petrol, €1.28 more than what is currently paid, while the levy will boost the cost of 60l of diesel by €1.48 to €12.54, Government calculations show.

The same figures indicate that the carbon tax on an average annual gas bill will rise by €16.86, more than €1.40 a-month, to €143.33.

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The Government is pledging to earmark the cash raised from the tax for specific purposes, including tackling fuel poverty to aid families and households unable to afford energy bills.

Figures published on Tuesday show that it will boost the Department of Social Protection’s allocation for such spending by €44 million next year to €306 million.

The Economic and Social Research Institute calculates that increasing the green tax will not hit the poorest families, but points out that they spend a higher proportion of their incomes on energy than better-off households.

The Department of Environment, Climate and Communications, led by Green Party Minister Eamon Ryan, will be a big beneficiary of the tax.

That department will receive an extra €89 million, to give it a total of €477 million to spend on several initiatives, chief of which will be energy efficiency measures for homes and communities, costing €469 million.

Budget 2025 main points: Energy credits, bonus welfare payments, higher minimum wage and tax changesOpens in new window ]

Those measures include the bill for retrofitting, which adds extra insulation to homes. The Government pledged in the National Development Plan to spend €8 billion on this up to 2030. Of that, it said that €5 billion would come from carbon taxes.

The State intends to boost insulation in 500,000 homes by the end of the decade and install 400,000 heat pumps over the same period. That will require retrofitting 75,000 dwellings a-year.

The department will have €2 million to spend on a green climate fund. It will also get €6 million for “just transition” to ease the impact of measures designed to prevent climate change on jobs and regional economies.

The Department of Agriculture, Food and the Marine’s slice of carbon tax returns will increase by €30 million to €143 million. Of this, it is due to spend €140 million on incentives for sustainable farming.

In all, the Government will spend €951 million from next year’s carbon tax take on areas specifically related the climate and energy, €163 million more than in 2024, its estimates show.

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Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas