FUNDING TO SUPPORT household retrofitting and solar panels, a lower VAT rate on heat pumps, and developing Ireland’s offshore wind grid are among the measures to receive allocations in Budget 2025 announced this afternoon.
On the revenue side, the annual increase to the carbon tax will go ahead as planned from next month.
The total amount allocated to the Department of Environment, Climate and Communications for the next year is €1.4 billion.
Minister for Climate Eamon Ryan has said that the “record investment for the department represents a real commitment to making sure that climate action is working for each and every household in Ireland”.
The carbon tax will increase from €56.00 to €63.50 per tonne of carbon dioxide emitted for petrol and diesel starting on 9 October. It will increase for other fuels from May 2025.
€3 billion has been allocated to an Infrastructure, Climate and Nature Fund for “investing in the climate transition and preparing for a greener future” between 2026 and 2030.
“We will shortly set out how this money will be invested to provide a clear and consistent signal to the market. The allocation process will be subject to engagement between myself and other relevant ministers,” said Minister for Public Expenditure Paschal Donohoe.
He said the fund would be used to support specific environmental projects that can help with reducing greenhouse gas emissions, improving water quality, or supporting nature and biodiversity.
€469 million will be put towards supporting home energy upgrades like retrofitting and installing solar PV panels, which is an €89 million increase on last year’s allocation. The funding comes from carbon tax revenue.
Additionally, VAT on heat pumps will be set at the lower rate of 9% to try to encourage their uptake among homeowners.
Meanwhile, €48 million from the EU’s RePowerEU fund will be put towards deep retrofits of HSE sites.
€51.7 million will go towards a just transition programme to support counties in the Midlands that are most affected by the ending of peat extraction, while €26.5 million has been allocated to helping developing countries to tackle climate change and cope with its effects.
The sale of the State’s shares in AIB shares will be used to make an initial direct equity injection of €750 million in developing electricity infrastructure, particularly the development of the new offshore wind grid.
Battery electric commercial vehicles (BEVs) will now qualify for the €200 VRT rate. “Currently, due to their battery weight, BEVs are at a competitive disadvantage compared to their fossil-fuelled counterparts, and cannot qualify for this reduced rate,” Minister for Finance Jack Chambers outlined. “Consequently, this amendment will bring them within its scope.”
VRT for Category B vehicles (that is, light commercial vehicles) will move to an emissions-based system which will provide for a lower 8% rate for vehicles in the category for CO2 emissions of less than 120 grams per kilometre.
Environmental campaigning organisation Friends of the Earth has said it is frustrated that the Budget did not feature enough innovative measures to make the climate transition fairer and more inclusive, though it welcomed the “incremental increases” in climate investment.
Clare O’Connor, Programme Coordinator with Friends of the Earth, called it a “missed opportunity in key areas where we wanted to see a step-change in policy and investment”.
“Renters are currently locked out of retrofitting opportunities. We wanted people on Housing Assistance Payments to be made eligible for the Warmer Homes Scheme of fully funded retrofits,” she said.
“The Government has not increased the budget for retrofitting social housing. It’s still just €90 million a year. They only plan to upgrade 25% of social housing by 2030.”
O’Connor said the group is “flabbergasted” at the “astronomical cost of the untargeted universal energy credit of €250 to every household”.
“That will cost €500 million, more than the total retrofitting budget for the coming year. The €250 untargeted energy credit is just not an efficient use of taxpayers’ money. You could have doubled the total funding for the Warmer Homes Scheme and still given everyone a €125 credit,” she said.
The Micro Renewable Energy Federation (MREF) welcomed the funding allocation for grid upgrades but said they should prioritise improved grid access and power exports for microgenerators, especially farmers and businesses.
“Grid constraints have become a major issue in some counties, including Donegal, and it is critical that the capital investment in the grid announced today deals with these issues completely,” said MREF chair Pat Smith.
He called on Minister Ryan to reverse planned reductions in individual grant levels for solar PV and reintroduce previous battery storage grants.
EV charging and solar power company ePower said it welcomed the provisions linked to promoting the use of electric vehicles.
CEO John O’Keeffe called the switch to the €200 VRT rate for BEVs is a “positive move to promote a switch away from fossil-fuelled transport”.
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