Budget 2025 delivers the largest allocation ever for the Department of Environment, alongside a confirmed rise in carbon tax that will increase the cost of petrol, diesel and home heating fuels from next week.
Carbon Tax Increase to €63.50 Per Tonne
The carbon tax will rise by €7.50 to €63.50 per tonne of CO₂. This will add:
-
€1.28 to an average tank of petrol
-
€1.48 to a tank of diesel
-
€0.89 to a 40kg bag of coal from May 2025
-
€19.40 to 900 litres of home heating oil
-
€16.86 to an average annual gas bill
The Government said the increase is part of a long term strategy to reduce emissions and fund climate initiatives.
Incentives for Low-Carbon Transport and Energy Upgrades
Budget 2025 includes a range of measures intended to accelerate the shift to cleaner energy:
-
BIK exemption for employers installing EV chargers at workers’ homes
-
VAT reduction on heat pumps from 23 percent to 9 percent
-
VRT on low-emission small goods vehicles cut from 13.3 percent to 8 percent
-
Electric commercial vehicles to qualify for a €200 VRT rate
A €99 million package will allow the Port of Cork to upgrade infrastructure needed to support offshore wind development.
Unprecedented Funding for Climate, Energy and Digital Infrastructure
Environment Minister Eamon Ryan said the record allocation demonstrates the Government’s commitment to a climate neutral and digitally connected Ireland. Funding includes:
-
€250 in electricity credits for more than two million households, delivered as two payments of €125 each between December and February
-
€469 million for retrofitting and solar PV, funded from carbon tax
-
€400 million for the National Broadband Plan
-
€750 million to strengthen the electricity grid
-
VAT on heat pumps reduced to 9 percent
The €469 million retrofit budget represents an €89 million increase on last year. Additional support from the European Regional Development Fund will bring the Warmer Homes Scheme to a total of €240 million in 2025. This scheme provides fully funded upgrades for low income households at risk of energy poverty and is now ten times larger than in 2020.
The Home Energy Upgrade Loan Scheme will continue, offering low-cost retrofit finance with rates from 3 percent.
Just Transition and Regional Investment
€51.7 million has been allocated for Ireland’s EU Just Transition Fund, supporting communities in the Midlands most affected by the end of peat extraction. Funding will help provide economic diversification, skills development and community regeneration.
Electricity infrastructure will receive a substantial boost, with €750 million of capital funding supported by proceeds from the State’s sale of AIB shares. This will contribute to Phase 1 of offshore grid development.
Broadband Expansion, Cybersecurity and Circular Economy Funding
Minister of State Ossian Smyth confirmed:
-
€400 million for continued rollout of the National Broadband Plan
-
30 new staff and additional funding for the National Cyber Security Centre
-
€127 million for circular economy initiatives supporting Ireland’s climate targets
Support for Post Offices
Minister of State James Lawless announced €10 million for the post office network in 2025, reaffirming the Government’s commitment to sustaining post offices as essential community infrastructure.
