Sustainability

What has changed since Budget 2027?

The Finance (No. 2) Bill 2026 contains no broad sustainability tax package; it largely implements Budget 2027 announcements. It raises the microgeneration income tax exemption from €400 to €600, reduces carbon tax on kerosene and natural gas, and defers scheduled increases for other fuels. Temporary fuel excise measures and extended relief for qualifying road transport operators address costs rather than decarbonisation. 

From 1 January 2027, Category A Vehicle Registration Tax (VRT) rates rise for emissions bands 3 to 20; electric-vehicle VRT relief runs to the end of 2028. Both were announced in Budget 2027.  

Who will be affected, and when?

The country as a whole will be impacted by the measures and funding announced in the Budget that will hope to stimulate the market to aid in the deployment of sustainable infrastructure.

What does this mean for businesses?

The Finance Bill’s sustainability measures will affect businesses differently, but their combined reach is broad and can impact on the cost base of a business. Fuel-tax changes may ease near-term costs for businesses that heat premises, move goods or operate vehicles. They do not remove the need to plan for future rate changes or reduce dependence on fossil fuels. Businesses buying or replacing vehicles should consider the proposed VRT increases for certain emissions bands alongside the extension of electric-vehicle relief when assessing fleet costs. 

What should businesses do now? 

Businesses should identify which proposals affect their fuel use or vehicle purchases, then update cost and investment forecasts using the relevant proposed dates and eligibility rules. Fleet operators should compare vehicle options on total cost, not VRT alone.  

Our view 

The Finance Bill reinforces, rather than reshapes, the sustainability story of Budget 2027. Its targeted changes matter: lower home-heating carbon taxes and deferred fuel-tax increases ease near-term pressures, while the electric-vehicle relief, higher charges for some cars and microgeneration exemption retain incentives to choose lower-carbon options. These measures pull in different directions. Cost relief is understandable where households and businesses cannot readily switch fuels, but it should not become a substitute for making cleaner alternatives practical and affordable. 

The central test of Budget 2027 remains delivery. Capital allocations will make a difference only if programmes become accessible, projects move through planning and procurement, and people can act on credible alternatives. Overall, the Bill makes targeted adjustments without materially changing Budget 2027’s sustainability agenda.