The Finance Bill and the green transition
From fuel costs to renewable energy incentives for households, Finance (No. 2) Bill 2026 contains practical measures for carbon-conscious taxpayers. Paul O’Brien examines the details
Finance (No. 2) Bill 2026 implements several Budget announcements relevant to Ireland’s green transition.
These measures are targeted, rather than broad, increasing the income tax exemption for household renewable electricity, extending a temporary enhancement to the Diesel Rebate Scheme and adjusting the timing or level of a number of carbon-related taxes.
For households and businesses, the practical significance lies in timing and cash flow. The package offers additional support in selected areas while postponing some planned carbon tax increases.
Although this provides near-term relief, it does not remove the need for taxpayers and operators to understand when revised rates apply and how the measures interact with their own energy and transport decisions.
Household renewable electricity
The annual exemption from income tax for certain profits from the micro-generation of electricity at a taxpayer’s sole or main residence increases from €400 to €600.
The change is modest in absolute terms but it improves the tax treatment of households earning income from surplus renewable energy. Its practical impact will depend on how much qualifying income each household earns from the generation of surplus electricity.
Taxpayers whose annual receipts related to this activity exceed the existing €400 threshold may benefit from the additional €200 exemption.
Households should weigh this relief against the wider economics of installing renewable technology, including capital cost, electricity savings and any payments received for surplus electricity generated.
Transport operators and the Diesel Rebate Scheme
The Bill extends the temporary enhancement to the Diesel Rebate Scheme until 31 December 2026. The scheme, provided for in Finance Act 1999, gives qualifying road transport operators partial relief from Mineral Oil Tax on auto diesel.
Temporary changes introduced by the Finance Act 2026 increased the maximum repayment rate under the Diesel Rebate Scheme from €75 to €120 per 1,000 litres for auto diesel purchased by qualifying operators between 1 January and 30 September 2026.
Finance (No.2) Bill 2026 extends this enhanced treatment for purchases through to 31 December 2026.
For qualifying operators, the extension may support short-term cost management by preserving the higher maximum repayment rate for an additional three months. The benefit is time-limited, so purchasing dates and eligibility remain important.
Businesses should ensure that their internal fuel records and claims processes can identify qualifying purchases made up to 31 December 2026.
This measure illustrates a tension within the wider green transition policy; road transport businesses face pressure to manage energy costs, while carbon policy is intended to influence longer-term behaviour.
Extending the Diesel Rebate Scheme enhancement provides short-term support to qualifying operators but it does not establish the treatment that will apply after 2026.
Operators should avoid treating the temporary rate as a permanent feature when budgeting beyond the extension period.
Changes to mineral oil taxes
Amendments to Mineral Oil Tax rates announced in the Budget were also confirmed in the Bill. Planned increases to carbon tax are postponed until 1 May 2027 and, for marked gas oil, until 13 October 2027.
Finance (No.2) Bill 2026 also confirms a permanent reduction in the Mineral Oil Tax rate on non-propellant kerosene.
Natural gas and solid fuel carbon taxes
The Bill confirms the amended Natural Gas Carbon Tax rate introduced by a Financial Resolution passed on Budget Day.
The applicable rate is €8.77 per megawatt hour.
It also postpones the increases due to apply to the Solid Fuel Carbon Tax until 1 May 2027.
Taken together, these provisions may ease some immediate energy-cost pressure, but should not be viewed as permanent reliefs given the overall policy intent to influence longer-term consumer behaviour.
Paul O’Brien is Tax Partner at KPMG Ireland