The Irish government presented its budget for 2027 on Wednesday against the backdrop of a summer of extreme temperatures and ongoing global energy security concerns, while Ireland’s climate goals of halving its greenhouse gas emissions by 2030 are creeping closer. How well do the fiscal priorities of the government reflect these challenges?
The most striking feature of the budget is the lowering of the carbon tax on natural gas from €63.50 to €48.50 per tonne of CO₂ until 2030, instead of increasing it to €78.50 per tonne by May 1st 2027 as originally planned. Moreover, increases in carbon tax on petrol, diesel, oil and other fossil fuels are deferred until May 1st 2027 and beyond. While this certainly reflects concerns about rising energy costs compounding an existing cost of living crisis as a result of the ongoing instability in the Middle East, these policy measures show a blatant disconnect from the reality of climate change, where each additional year of surplus carbon emissions — which CO₂ taxes are meant to disincentivise — compounds the risk of extreme weather, income loss for agriculture and jeopardises water and energy security further. Thus, short-sighted economic policies may have ecological as well as economic repercussions in the long term.
One may wonder if the funds from reduced CO₂ taxes in the new budget may not have been better used in alternative fiscal provisions such as an income-based grant to households, a further expansion of the weekly Fuel Allowance for households opting for lower-emitting heating sources than the general €5 increase announced in the budget, or a reversal of the increases in the public transport fares planned for 2028. Such measures would arguably be more sustainable by alleviating the cost of living crisis without jeopardising Ireland’s climate goals.
Even so, the budget also holds some tentatively positive news for the climate. For example, the €5000 tax relief on the Vehicle Registration Tax for electric vehicles remains intact until 2028, while VRT rates for cars with CO₂ emissions of more than 80g/km will increase by 1% from January 2027. In addition, further funds are allocated to the expansion of public transport, including the planned Metrolink from Dublin Airport. While these measures may encourage consumers to switch to lower-emitting forms of transportation, one must wonder whether the aforementioned frozen taxes on petrol will delay or even cancel out this change in consumer behaviour.
Thus, the 2027 budget leaves much to wish for, not just for the climate and environment, but also for the long-term wellbeing of the Irish economy and the people living in it.
