THE CONTROVERSIAL CARBON tax is due to rise again next month but the abolition of another levy will offset its impact on the cost of fuel for vehicles.

The carbon tax, which is levied against heavy-emitting fuels such as oil, coal, natural gas and peat, is rising again as planned.

The increase is set to apply starting from October, when it will add just over two cents per litre to the cost of petrol and diesel.

The rate will increase from €41 to €48.50 per tonne of carbon dioxide on auto fuels from 12 October and all other fuels from 1 May 2023.

However, something different in this year’s Budget to previous ones is that the increase from the carbon tax on the price of oil is set to be offset by cutting the National Oil Reserves Agency (Nora) levy.

Revenue from the carbon tax is allocated to climate action measures such as retrofitting, agriculture schemes, and social protection for communities affected by climate action.

Speaking to reporters at a post-Budget announcement briefing, Climate Minister Eamon Ryan said that there are EU measures which are “very much targeted at electricity and gas, so I think it was appropriate to have a reduction in oil price as a supportive cost of living measure across the board”.

“It doesn’t reduce the Climate Fund. We’ve got agreement from Government that in any reduced revenue, the Climate Fund will still get the revenue in,” the minister said.

The Department of the Environment expects to release details in the weeks or months to come about further initiatives backed by the fund.

Ryan said that the move on carbon taxes and Nora was “an appropriate measure” that gives “added protection for some of those areas that are hard to reach”.

The Department of Transport, which also falls under Minister Ryan’s brief, announced that fare reductions on public transport that came in last year have been extended.

The move was welcomed but it fell short of some expectations that a further cut would be made to the cost of public transport tickets.

“We did face a choice, I faced a choice particularly, because any Budget, you’re constrained with what the overall envelope is,” the minister said.

“You have to look at the bigger picture as well, but also within our department.”

He said the focus instead is on measures like rolling out new bus services.

“We could just, say, do everything about cutting fares, keeping fares down. But if it’s a choice between that and rolling out new services, I think people also want new services, and I believe that should be our focus now.

He said the extension of the reduced fares “wasn’t an insignificant concession or win for us from Government, because it wasn’t cheap, but actually to be able to maintain those fare reductions and expand public transport, that’s the prize”.

Much of the discussion about climate in this year’s Budget is linked to efforts to bring down the cost of energy.

The minister said that attacking the climate crisis and soaring energy prices “go hand in hand”.

Responding to the Budget, chief executive of Friends of the Earth Oisín Coughlan said that it brought some welcome measures but did not go far enough to seriously reduce fossil fuel consumption.

“This Budget offers people some short term relief from skyrocketing fossil fuel prices but it doesn’t go far enough or fast enough to get us off fossil fuels for good,” Coughlan said.

“The expansion of the fuel allowance and the €400 lump sum are welcome but why are people on Working Family Payment excluded and why is there no increase in the basic weekly rate?” he said.

“And of course, while the Fuel Allowance is an essential sticking plaster the real solution is more insulation and retrofitting so people have warmer homes and lower bills with less pollution.

“The extra money for retrofitting next year is welcome but the target of 37,000 houses is far too low. This is an emergency. We should be insulating 100,000 houses before next winter.”