Documents published by the Department of Finance ahead of Budget 2027 appear to pour cold water on any possible suspension of the carbon tax.

The annual documents from the Tax Strategy Group (TSG) have been published by the Department of Finance.

These documents outline key considerations on taxation ahead of each national budget.

One of these papers covers energy, environmental and vehicle tax.

This documents states the maintaining the incremental annual carbon tax increases is "in line with best international practice" in terms of energy crisis response.

For most of this year there have been calls from many non-government politicians, agri-sector stakeholders, and many other groups for the carbon tax increases to be suspended due to high increases in fuel costs as a result of the war in the Middle East between the US and Iran.

At the current rate of increase, the carbon tax is set to increase by €7.50 per tonne of CO2 until 2029, followed by one final increase of €6.50/t, bringing the tax rate to €100/t by 2030.

The document notes that there have been calls for the trajectory of increases to the tax to be discontinued during a time of heightened fuel prices.

It also outlines that Ireland, like many other countries, reduced excise rates to help energy price inflation.

However, the TSG cites international criticism of this move as "untargeted and costly", amid a concern that it weakened price signals that would encourage people to conserve energy.

As well as that, the International Monetary Fund (IMF) said that governments should allow energy prices to reflect global market conditions, and instead rely on temporary, targeted supports for vulnerable households.

"As such, a policy decision to maintain the carbon tax is in line with best international practice in terms of energy crisis response as well as overall long-term energy and climate policy," the TSG paper says.

The paper adds that it would be possible to examine alternatives to suspending the tax, such as stretching out the timeline by which the carbon tax must be fully in place at €100/t, or by having separate timelines for different fuel types.

However, the document says that any potential change along these lines would need to take account of the Programme for Government commitment to continue carbon tax increases and use the proceeds to fund measures like energy efficiency upgrades and agri-environment schemes.

As well as that, the document says that Ireland's current expected rate of carbon tax increase allows the country to be exempted from the EU's Emissions Trading System (ETS).

If the rate of carbon tax here fell below the expected average price of a carbon credit in the ETS, Ireland would then be forced into joining the ETS, meaning fuel suppliers would have to buy credits, or allowances, on the EU 'carbon market' in order to do business.