The government have often relied on Tax-related strategies in driving behavioural change which has been very effective over the years, and with an election year around the corner, it is envisaged that the government will look to strengthen its green initiatives further in order to close the gap in meeting the ambitious targets set for 2030.
Sinead McMahon, Associate Partner at RBK, explores the potential green initiatives to be introduced, with a particular focus on tax measures which we can expect to see in Budget 2025.
1. Increased Carbon Tax and Expanded Climate Action Fund
A predictable cornerstone of Ireland’s environmental fiscal strategy is the carbon tax, which has steadily increased in recent years. Under the government’s Climate Action Plan, the carbon tax is set to rise incrementally until it reaches €100 per tonne by 2030. Budget 2025 will likely see another step towards this target.
This tax aims to encourage businesses and households to reduce their reliance on fossil fuels. The anticipated increase is designed to reflect the cost of carbon emissions on the environment and to steer society towards greener alternatives, such as renewable energy and electric vehicles (EVs).
2. Electric Vehicle (EV) Incentives
Encouraging the adoption of electric vehicles (EVs) has been a significant part of Ireland’s climate strategy, and this trend is likely to continue. In light of the slowdown in the switch to electric vehicles the Government has an opportunity to look at ways to boost their sales, Budget 2025 is likely to contain enhanced support for electric vehicles, with several key tax initiatives likely to emerge, such as:
- Continuation of VRT (Vehicle Registration Tax) Relief for battery electric vehicles (BEVs).
- Expansion of the SEAI (Sustainable Energy Authority of Ireland) Grant to increase the ceiling for eligibility to reflect inflation and rising car prices.
- The current benefit-in-kind (BIK) tax reductions for electric company cars could be extended to encourage businesses to green their fleets. This scheme, which offers significant tax savings, has been a critical driver of EV adoption within corporations. With the slowdown in switching to EV the Government might take this opportunity to reverse the tapering of the EV BIK incentives.
- Investment in EV charging infrastructure will also be crucial. Alongside tax measures, capital investments in expanding the charging network, particularly in rural areas, will be necessary to ensure the widespread adoption of EVs.
3. Energy Efficiency in Homes
Energy efficiency remains one of the most cost-effective ways to reduce emissions. In Budget 2025, the government will aim to enhance tax incentives for homeowners and landlords who invest in retrofitting and other energy-saving upgrades.
4. Green Tax Credits for Businesses
As businesses play a critical role in achieving Ireland’s climate objectives, the government may introduce new green tax credits and expand existing ones to encourage companies to reduce their environmental impact. Some of the measures we might see are:
Budget 2025 may offer enhanced tax credits for companies engaging in research and development (R&D) aimed at environmental innovation. This would encourage businesses to develop and adopt cutting-edge technologies in renewable energy, energy storage, and other green sectors.
Companies may also benefit from accelerated capital allowances for investments in energy-efficient equipment. Expanding the range of qualifying technologies could motivate businesses to adopt greener operations while improving their financial bottom line.
As Ireland continues its transition towards a circular economy, Budget 2025 may introduce new measures such as a plastic packaging tax to dissuade the use of non-recyclable materials. Simultaneously, tax incentives could be introduced for companies that invest in recycling technologies or adopt sustainable practices, such as zero-waste manufacturing.
5. Green Agriculture Initiatives
Given that agriculture accounts for approximately one-third of Ireland's greenhouse gas emissions, we expect Budget 2025 to include specific measures aimed at supporting farmers in adopting more sustainable practices. These may include:
- Expansion of Green Farming Subsidies for carbon-efficient farming techniques such as low-emission slurry spreading and organic farming, possibly through tax relief or grants.
- Budget 2025 could also introduce tax breaks for farmers who invest in renewable energy infrastructure on their land, to encourage the agricultural sector to generate its own clean energy while reducing emissions.
Conclusion
Budget 2025 will continue Ireland’s shift towards a greener, more sustainable future, with tax initiatives at the heart of the strategy. From carbon tax hikes and electric vehicle incentives, to supports for energy efficiency and green farming, these measures will aim to meet the country’s climate goals with a smooth transition for households, businesses, and communities. As climate action becomes an increasingly central focus of government policy, the role of taxation in driving behavioural and structural change cannot be underestimated.
Over the next few weeks in the lead up to Budget 2025 #RBKtax will look at potential tax measures that the Government could consider and provide insights into Budget 2025.
Budget Briefing Hybrid Event
RBK will be holding its annual Breakfast Budget Briefing as a hybrid event in person at the Athlone Springs Hotel in Athlone and streaming live online on Wednesday, 2nd October. Mike Scanlan, Tax Director, RBK will be analysing the tax measures announced in Budget 2025 and David McNamara, Chief Economist with AIB will look at the economic outlook.
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