The government is to offset a planned hike in the carbon tax next month by cutting the National Oil Reserves Agency (NORA) levy.
Minister for Finance Paschal Donohoe unveiled Budget 2023 to the Dáil today (Tuesday, September 27) where he said the price of fuel at the pumps would not increase.
In a budget focused on the ongoing cost-of-living crisis, the minister said that climate change is “one of the other key challenges of our times”, with its effects becoming more frequent and more destructive.
Donohoe said that the additional funding needed for measures, such as retrofitting and more sustainable modes of travel, comes in part from the carbon tax.
“Protecting our environment is the responsibility of us all and government is acting to reduce emissions and support newer cleaner technologies, particularly in energy and transport,” he added.
€81 million in carbon tax funding will be provided to the Department of Agriculture, Food and the Marine (DAFM) in 2023.
This increased funding will be used to fund the new agri-climate rural environment scheme (ACRES) detailed in Ireland’s Common Agricultural Policy (CAP) Strategic Plan.
This is aimed at supporting up to 50,000 farmers who undertake actions that will support improved outcomes on biodiversity, climate, air and water quality.
Minister Donohoe confirmed that the rate per tonne of carbon dioxide emitted for petrol and diesel will increase from €41 to €48.50 from October 12.
“This will mean that there will be an increase of just over 2c VAT inclusive per litre of petrol and diesel,” he said.
However, the minister said that he recognised the “sharp cost-of-living challenges” currently facing the public and therefore the carbon tax hike would be offset by a reduction to zero of the National Oil Reserves Agency (NORA) levy.
The levy was introduced in 1996 as a means of funding the maintenance of holding 90 days of strategic oil reserves for use in an emergency.
“The NORA levy which is collected at a rate of 2c/L (VAT exclusive) will help offset the carbon tax increase which means that the price at the pump will not go up as a result of taxes or levies,” the minister said.
Donohoe confirmed that the current excise reduction of 21c/L for petrol, 16c/L for diesel and 5.4c/L of marked gas oil (green diesel), along with the 9% VAT rate for electricity and gas, will be extended until February 28, 2023.
The minister also addressed the record profits being made by energy companies.
“Much work is underway in the EU on capturing the windfall gains of energy companies. It is not fair for companies to earn excess profits from the current volatility in the market.
“Ireland aims to be part of this EU-wide response to high energy prices. If this is not possible, this government will bring forward our own measures,” he said.