The government has announced plans to invest a portion of “windfall” corporation tax receipts in a new Infrastructure, Climate and Nature Fund, which could contain €14bn for infrastructure, climate and nature projects by the end of the decade.

A total of €3.15bn will be reserved for climate and nature projects, in particular to help achieve carbon budgets. The funding will be available to draw down from 2026 onwards.

The ringfenced green funding has been welcomed by environmental campaigners, with Friends of the Earth describing it as a “landmark” development.

Minister for Finance Michael McGrath said that under the fund, capital projects will be planned in areas where it is clear climate targets are not being reached.

The new fund will operate in a “counter-cyclical manner”, McGrath said.

That means it will allow for capital investment in infrastructure during economic downturns. Counter-cyclical measures aim to avoid overheating the economy during a period of growth and to maintain employment during downturns.

McGrath said the fund will “grow incrementally by €2 billion for seven consecutive years when it will reach €14 billion plus interest accrued”.

“In 2024, the first €2 billion contribution will come from the dissolution of the National Reserve Fund,” he explained.

“While it is important that we prevent a reoccurrence of ‘stop-start’ public capital investment as we have seen in the past, we must also consider the known challenges facing our society and economy,” McGrath said.

“The impact from rising global temperatures as a result of climate change will affect all parts of our society.”

The new fund, along with a separate €100bn Future Ireland Fund aimed at future-proofing the economy also announced on Tuesday, will be managed and invested by the National Treasury Management Agency.

The Green Party said that while the exact projects to be funded have not yet been decided, it was likely the focus would be on helping to “cut Ireland’s use of dirty, imported fossil fuels” as well as improving energy efficiency of buildings and roll out district heating.

It also instanced projects to “restore our natural habitats, improve water quality in our rivers and lakes, reintroduce once-common species such as eagles and osprey, and remove river barriers that stop fish swimming upstream”.

“The recent announcement of a new National Park in Dowth, Co. Meath is one such example of the type of project that could be supported,” the Green Party said in a statement.

Oisín Coghlan of Friends of the Earth said the new fund was “not enough yet, but a substantial downpayment on fair and fast transition to zero pollution”.

He said the “landmark” establishment of the fund could “help underpin climate action and nature restoration for years to come”.

It means that whoever is in government after the next election will have funds to invest in getting off fossil fuels and reducing pollution, no matter what happens to tax receipts.”

He added that the ringfencing of €3bn for climate and nature was “significant” and would “increase the chances of the policy consistency that households and businesses need to drive the transition to zero pollution”.

“Finally, it’s very welcome that this part of the rainy day fund can be drawn down from 2026, given that when it comes to climate breakdown and biodiversity loss, the rainy day is already here.”

Business lobby Ibec also welcomed the new fund, which it said “has the potential to significantly enhance social, economic, and environmental infrastructure over the next decade”.

Ibec CEO Danny McCoy said: “The fund will ensure the protection of public capital projects during cyclical downturns, reduce the need for ‘catch-up’ spending, provide improved value for money, and offer greater certainty to sectors downstream of infrastructure delivery.”