Sustainability

Key measures

A number of measures were announced in Budget 2024 to address the challenges posed by climate change. The largest being the creation of a new Infrastructure, Climate and Nature Fund which will have €14 billion to invest in projects up by 2030, over €3billion of which will be dedicated to climate and nature projects. This funding is in addition to currently allocated funding set out in the National Development Plan. Exact projects or mechanisms through which the funding will filter through to investments have not been set out in the budget. Indications are that the fund will support a wide range of investments important to the reduction of greenhouse gas emissions, and the protection of nature and biodiversity loss.

Other measures included the extension of the Accelerated Capital Allowance scheme for energy efficient equipment for two years, a doubling of the tax disregard in respect of personal income for households selling residual energy from microgeneration, a zero VAT rate on the supply and installation of solar panels for domestic dwellings and schools, an extension of BIK relief for electric vehicles and an extension of VRT relief for battery electric vehicles to the end of 2025.
 

Who will be affected?

It is currently unclear how the dedicated €3 billion of Climate and Nature projects will be utilised and who will benefit from this investment.

At a domestic level, those who have or are to invest in solar or microgeneration technologies will benefit from reduced VAT rates on supply and installation. In addition, they will benefit on profits derived from sale of residual energy sold to the grid.

When? What to do now?

• From 1 January 2024 an income disregard of up to €400 per year will apply to profits arising from micro-generation.
•  A zero VAT rate will apply to the supply and installation of solar panels for schools will also come into effect on 1 January 2024.
  
• On the 11 October, the carbon tax will increase from €48.50 to €56 per tonne.
   

Our view

In June the EPA released projections outlining that Ireland will achieve a reduction of 29% in Greenhouse Gas emissions by 2030. This is significantly below the 51% target set out in the Climate Act and EU targets set out in the Effort Sharing Regulation. The announcement of the new Infrastructure, Climate and Nature Fund is welcomed given the challenges faced by all aspects of society in addressing climate change. We await with interest to see how this fund will translate to funding incentives and investments that will support Ireland in meeting climate goals.

 The costs of meeting Ireland’s goals are mounting and we are at a critical juncture in ensuring that our ambitions as a nation are met. Minister Donohue mentioned Ireland’s leading position for the generation of electricity from renewable sources. We have recently seen the impact of increasing costs to deliver renewable energy projects on the UK’s version of RESS where only one-third of previous auctions capacity was reached. In Ireland, RESS 3 has been undersubscribed due to a mixture of planning delays and the cost of inflation. This Budget has gone some way to reducing the costs of meeting our climate goals by providing extensions to tax incentives for energy efficient equipment and VAT rates on essential solar panels. It has also been mentioned that the resources required to ensure the planning delays encountered by the renewable energy sector will be tackled. This focus, along with the introduction of the Infrastructure, Climate and Nature Fund, we hope will assist in achieving our carbon reduction goals and that we are on track to produce 80% of our electricity needs from renewable energy sources.

We would encourage that part of this fund is targeted at strategically important business incentives that can help to accelerate development in areas such as renewable energy, R&D or measures stimulate the market to focus on climate change. To meet our climate goals further incentivisation regimes are needed. These must be for commercial and domestic interests to ensure that all aspects of society can achieve a fair and just transition to a lower carbon future. While welcome from a cost of living perspective, energy credits and supports do little to reduce energy use and increase carbon emissions. Failing to address the country’s continuing inability to meet carbon reduction targets will lead to significant financial and societal challenges in the future.
 

Key measures in the Finance (No.2) Bill 2023

• An extension of BIK relief for electric vehicles.
  
• Doubling of the tax disregard from €200 to €400 in respect of personal income for households selling residual energy from microgeneration.
  
• Accelerated Capital Allowance scheme for energy efficient equipment extended for two years.
  
• Increase of carbon tax from €48.50 to €56 per tonne from the 11th October 2023.
  
• The temporary excise rate reductions applying to auto diesel, petrol and marked gas oil which were due to expire on 31 October 2023 are being extended until 31 March 2024. Half of the outstanding amounts will be restored on 1 April 2024, with the balance restored on 1 August 2024.
  
• An extension of VRT relief for battery electric vehicles to the end of 2025.
  
• A zero VAT rate on the supply and installation of solar panels in primary and post-primary schools.