Ireland’s Department of Finance modeled and published research in 2024 examining the potential impacts of the low-carbon transition on carbon tax yields in Ireland over the next six years.
Increases in carbon tax revenue led to almost €935 million in revenue in 2023: approximately 1% of exchequer tax receipts. Total exchequer revenues from the carbon tax in the next six years are estimated to be €8.8 billion.
Key Messages
- To provide fiscal insights to inform policy, a scenario analysis of the potential impact on carbon tax revenues of implementing targets from the Irish Government’s Climate Action Plan 2024 (CAP24) was conducted. The analysis maps the projected estimates of energy use from the Sustainable Energy Authority of Ireland (SEAI) and links them to the expected fuel requirements to carbon tax rates and exchequer net carbon tax receipts based on “With Additional Measure” (WAM) and “With Existing Measure” (WEM) scenarios from the SEAI and the Environmental Protection Agency (EPA).
- In the six years from 2024, the carbon tax is estimated to raise €8.8 billion in exchequer revenue, based on planned carbon tax rate increases and the WAM fuel scenarios from the SEAI. Of this, €6.4 billion may be directly allocated to climate action, on a no-policy-change basis.
- Under the SEAI WEM fuel scenario and planned carbon tax rate increases, net carbon tax receipts are estimated to raise an additional €9.7 billion in exchequer revenue. Of this, approximately €7.1 billion is estimated to be raised from increases above the baseline rate of €20 per ton of CO2 emitted, which is ring-fenced for “just transition” climate action.
To achieve decarbonization over the medium-term, aiming for carbon neutrality by 2050, protecting exchequer revenue streams in an environmentally appropriate fashion, alongside influencing and encouraging behavioral change, will be critical. Changes to taxation alone cannot achieve the necessary greenhouse gas emissions reductions, but taxation clearly has an important role to play as part of the wider climate action response.