Carbon tax is a government charge on fossil fuels designed to reduce carbon emissions. If you heat your home with gas, oil, or solid fuels, carbon tax affects your bills. Here's how it works and what it costs you.
What Is Carbon Tax?
Carbon tax is a levy on fuels that produce carbon dioxide when burned. The idea is simple: making carbon-intensive fuels more expensive encourages people to use less of them and switch to cleaner alternatives.
In Ireland, carbon tax applies to:
- Natural gas
- Heating oil (kerosene)
- Coal and peat
- Petrol and diesel
- LPG
The tax is charged per tonne of CO2 that the fuel produces when burned.
Current Carbon Tax Rate
As of 2026, the carbon tax rate in Ireland is €100 per tonne of CO2.
This translates to different costs depending on the fuel:
| Fuel | Carbon Tax per Unit |
|---|---|
| Natural gas | €0.0125 per kWh (incl. VAT) |
| Heating oil (kerosene) | €0.162 per litre |
| Coal | €0.125 per kg |
| Peat briquettes | €0.059 per kg |
| Petrol | €0.091 per litre |
| Diesel | €0.105 per litre |
| LPG | €0.063 per litre |
Carbon Tax on Your Gas Bill
For gas customers, carbon tax appears as a separate charge or is included in your unit rate.
How Much Does It Add?
For an average household using 11,000 kWh of gas per year:
| Component | Calculation | Cost |
|---|---|---|
| Carbon tax | 11,000 × €0.0125 | €138 |
Carbon tax adds approximately €138 per year to an average gas bill.
Where It Appears
On your gas bill, you may see:
- A separate "Carbon Tax" line item
- Or it may be included in the unit rate
Either way, all gas customers pay the same carbon tax—it's not a supplier markup.
Carbon Tax on Heating Oil
If you use heating oil (kerosene), carbon tax is included in the price you pay at the pump or for delivery.
How Much Does It Add?
For a household using 1,000 litres of heating oil per year:
| Component | Calculation | Cost |
|---|---|---|
| Carbon tax | 1,000 × €0.162 | €162 |
Carbon tax adds approximately €162 per year to heating oil costs.
You won't see this as a separate line item—it's built into the price per litre.
Carbon Tax History and Future Increases
Carbon tax in Ireland has been gradually increasing:
| Year | Rate per Tonne CO2 |
|---|---|
| 2010 | €15 |
| 2012 | €20 |
| 2014 | €20 |
| 2019 | €20 |
| 2020 | €33.50 |
| 2021 | €41 |
| 2022 | €48.50 |
| 2023 | €56 |
| 2024 | €63.50 |
| 2025 | €78 |
| 2026 | €100 |
The government committed to annual increases reaching €100 per tonne by 2030. As of 2026, this target has been reached ahead of schedule.
Future increases beyond €100/tonne have not been confirmed but remain possible depending on climate policy.
What Carbon Tax Funds
Revenue from carbon tax is ring-fenced for:
Climate Action
- Renewable energy projects
- Energy efficiency schemes
- Public transport improvements
- Climate research
Protecting Vulnerable Households
- Increased fuel allowance payments
- Energy poverty reduction measures
- Social welfare increases to offset costs
Just Transition
- Supporting workers in carbon-intensive industries
- Retraining programmes
- Community development in affected areas
The government argues that while carbon tax increases fuel costs, the revenue funds measures that help households reduce dependence on fossil fuels.
Carbon Tax vs PSO Levy
People sometimes confuse carbon tax and the PSO levy. They're different:
| Carbon Tax | PSO Levy | |
|---|---|---|
| What it applies to | Fossil fuels (gas, oil, coal) | Electricity only |
| Purpose | Reduce carbon emissions | Fund renewable generation |
| Based on | CO2 content of fuel | Fixed charge per customer |
| Appears on | Gas bill, fuel prices | Electricity bill |
Carbon tax makes fossil fuels more expensive. The PSO levy funds renewable electricity generation.
How to Reduce Your Carbon Tax Bill
Since carbon tax is based on consumption, using less fossil fuel reduces your carbon tax bill:
1. Improve Home Insulation
Better insulation means less heating fuel needed:
- Attic insulation: SEAI grant up to €1,500
- Cavity wall insulation: SEAI grant up to €1,700
- External wall insulation: SEAI grant up to €8,000
2. Upgrade Your Heating System
More efficient boilers use less fuel:
- Modern condensing boilers: 90%+ efficiency
- Heat pumps: 300-400% efficiency (no carbon tax)
- SEAI grants available for upgrades
3. Switch to Renewable Heating
Heat pumps use electricity, not gas or oil. No carbon tax applies:
- Air-to-water heat pumps
- Ground source heat pumps
- SEAI grants up to €6,500
4. Smart Heating Controls
Using heating only when needed reduces consumption:
- Programmable thermostats
- Smart heating controls
- Zoned heating
5. Reduce Hot Water Usage
Gas water heating incurs carbon tax:
- Shorter showers
- Efficient showerheads
- Solar thermal water heating
Carbon Tax and Electricity
Electricity bills don't include carbon tax directly. However, carbon tax affects electricity prices indirectly:
- Gas-fired power stations pay carbon tax
- This increases wholesale electricity costs
- Higher costs are passed to consumers in unit rates
So while you don't see "carbon tax" on your electricity bill, fossil fuel carbon costs are embedded in electricity prices.
This is one reason why renewable electricity is becoming more competitive—it doesn't face carbon costs.
Financial Support for Carbon Tax
Several measures help offset carbon tax costs for vulnerable households:
Fuel Allowance
A weekly payment (currently €33) for 28 weeks to help with heating costs. Eligibility based on social welfare payments and means testing.
Household Benefits Package
Includes electricity/gas allowances for qualifying households (typically pensioners and certain social welfare recipients).
SEAI Grants
Grants for energy efficiency improvements that reduce fuel consumption and therefore carbon tax exposure.
Warmer Homes Scheme
Free energy efficiency upgrades for eligible low-income households.
Common Questions
Is carbon tax the same across all suppliers?
Yes. Carbon tax is set by the government and applies equally regardless of which gas or oil supplier you use.
Can I avoid carbon tax?
Not directly if you use fossil fuels. However, switching to electric heating (heat pumps) eliminates gas carbon tax. The electricity used has its own costs but no carbon tax.
Will carbon tax keep increasing?
The current target of €100/tonne was reached in 2026. Future increases beyond this haven't been confirmed but are possible.
Does renewable gas attract carbon tax?
Biomethane (renewable gas) attracts reduced or zero carbon tax as it's considered carbon-neutral. However, renewable gas is not widely available for residential customers yet.
Why doesn't electricity have carbon tax?
Power generators pay carbon tax on the fossil fuels they burn. This cost is passed through in wholesale electricity prices. Adding carbon tax to electricity bills would double-count.
How does Ireland's carbon tax compare internationally?
Ireland has one of the highest carbon tax rates in the world. Sweden leads at approximately €120/tonne, with Ireland now at €100/tonne.
Summary
Carbon tax is a deliberate policy to make fossil fuels more expensive, encouraging reduced consumption and switching to cleaner alternatives.
Key impacts:
- Gas bills: ~€138/year extra for average household
- Heating oil: ~€162/year extra for average household
- Rate: €100 per tonne CO2 as of 2026
To reduce exposure:
- Improve insulation
- Upgrade to efficient heating
- Consider heat pumps (no carbon tax)
- Use SEAI grants for improvements
As carbon tax increases, the financial case for switching to renewable heating strengthens. Planning upgrades now can reduce long-term costs.
Last updated: January 2026
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