Naoise Ó Muirí (Dublin Bay North, Fine Gael)
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72. To ask the Minister for Finance his views on the way Ireland’s taxation system could help citizens mitigate risks with regard to the impact of climate change as identified in the Climate Change Risk Matrix as published by his Department; and if he will make a statement on the matter. [15670/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy may know, taxation policy with regard to greenhouse gas emissions is largely based on the polluter-pays principle, whereby high emission energy products, fuels or vehicles are subject to the highest levels of taxation. National taxation measures are reviewed and examined as part of the annual budgetary cycle and the policy options considered are published in the Tax Strategy Group papers each year.

The taxation system has an important role in supporting efforts to transition to a low carbon economy and, over the past number of years, we have brought in a number of environmental taxation reforms including legislating for increases in the carbon tax, as well as climate-proportionate changes to the vehicle registration tax and motor tax regimes. In particular, I view the implementation of the statutory trajectory for increasing the carbon tax to €100 per tonne by 2030 as a central building block of our national decarbonisation taxation strategy.

As deputies will be aware, Government is committed to a carbon tax regime that is progressive with revenue raised from increases in the carbon tax since 2020 being hypothecated and thereby allocated for expenditure on climate action and the Just Transition. The additional revenue raised by increasing the carbon tax is ring-fenced and used to enable transitional changes, to encourage the greening of agriculture and to provide targeted social welfare and other measures to prevent energy poverty.

Research published by the ESRI in relation to this treatment of the carbon tax revenue shows that poverty can be reduced in this way, with a fifth of households left better-off by using a third of revenues from a carbon tax rise on targeted increases in welfare payments. This helps ameliorate the potentially regressive impact of an uncompensated carbon tax rise.

€951 million of carbon tax revenue was allocated as part of Budget 2025 to climate action measures, sustainable farming, and to ensure the most vulnerable are protected from unintended impacts of the tax increase. This represents an increase of €163 million on the amount funded from the carbon tax increases in 2024.

Taxation policy is also supporting other areas of the climate transition. For example, in support of our retrofitting targets, my Department introduced a tax deduction of up to €10,000 per property for small-scale landlords who undertake retrofit works while the tenant remains in situ, and in support of our renewables targets the VAT rate on the supply and installation of solar panels for private dwellings is zero, with this measure also extended to schools as part of Budget 2024.

With regard to my Department’s climate change risk matrix, this provides a high level overview of how climate change physical and transitional risks are interlinked to the economy and to the financial system through a range of transmission channels. This framework forms part of work that my Department is conducting to model and refine our understanding of climate-related economic, fiscal and financial risks, and is in line with the requirement set out in the Programme for Government that all Departments should make climate action a core pillar of their new strategies.