Müge Adalet McGowan, OECD
OECD Economic Surveys: Ireland 2025
Abstract
Ireland has ambitious climate targets, including cutting greenhouse gas emissions by 51% from 2018 levels by 2030 and climate neutrality by 2050. However, the speed of implementation and compliance with sectoral limits should improve to meet intermediate targets. The expansion of renewable electricity will be key to lowering dependence on fossil fuels to support the green transition and boost energy security. Electricity demand is projected to increase due to data centres and the electrification of heating and transport, which requires improved flexibility and demand management. Given the high share of transport, buildings and agriculture in Irish greenhouse emissions, reducing emissions in these sectors should be prioritised. Carbon taxation should also be made more uniform across sectors. It will also be important to build on the new national adaptation framework to increase resilience to extreme events by standardising monitoring and risk assessment.
Ireland has adopted a strong legislative climate action framework linked to ambitious national targets of cutting greenhouse gas (GHG) emissions by 51% from 2018 levels by 2030 (against an EU target of reducing emissions by at least 42% by 2030 versus 2005 levels) and achieving climate neutrality by 2050 (Figure 3.1, Panel A). These targets are aligned with Ireland’s obligations under the Paris agreement via the Nationally Determined Contribution tabled by the EU on behalf of its Member States. However, emissions per capita remain among the OECD’s highest (Panel B), and robust economic and population growth over the past decade has slowed the trend of emission reductions. In 2023, GHG emissions, excluding land-use change, and forestry (LULUCF) declined by 6.8% from a year earlier, which is welcome. The newly-established Infrastructure, Climate and Nature Fund (Chapter 1) can help facilitate the investment needed to reach targets.
Note: Panel A: 2030 national target is based on the Climate Act that aims to reduce emissions by 51% compared to 2018 levels, while the 2030 new EU target aims to reduce emissions by 42% versus 2005 levels.
Source: Environmental Protection Agency; IEA, Environment Statistics (Air and Climate) – GHG emissions database.
Ireland is not on track to meet its 2030 targets (with a 7.8% reduction in 2023 compared to 2018) and needs to make progress in putting emissions on a sustained downward trend (EPA, 2024a and b). In line with the Climate Act 2021, carbon budgets of three five-year periods were set in 2022, with sectoral limits of emission reductions of 75% in the electricity sector, 50% for transport, 45% for buildings, 35% for industry and 25% for agriculture by 2030 (compared to 2018 levels). If current trends continue, the first carbon budgets will be exceeded in some sectors, with 64% of the allocation already used in the first three years (EPA, 2024b; Figure 3.2). The cost of purchasing compliance from other over-performing EU Member States in order to meet EU targets were estimated to be around EUR 8 billion for the effort-sharing regulation alone, with exact costs dependent on progress in reducing emissions across EU Member States and on future prices (CCAC, 2024a). There are also some concerns about the availability of credits required to demonstrate compliance given that other EU countries could be reluctant to trade as it is anticipated many will face difficulties in meeting their targets (CCAC, 2024a).
First sectoral ceilings 2021-25 and usage
Note: Budget used refers to 2021-23.
Source: EPA (2024b), Ireland’s Provisional Greenhouse Gas Emissions, 1990-2023, Environmental Protection Agency.
There is a need to shift from planning to implementation, with a focus on delivery of concrete actions. The Environmental Protection Agency’s inventory and projections reports, which inform the monitoring of actions, do not incorporate some of the announced measures in their modelling due to lack of details on concrete implementation or a realistic chance of achievement within the stated timeframe (EPA, 2024c). An assessment of the draft National Climate and Energy Plan was also difficult due to the lack of concrete implementation pathways (EC, 2024). The preparation of extensive annual climate action plans to monitor progress and assess the actions and budget needed takes up significant resources (IEA, 2025), with the latest plan at 420 pages (Government of Ireland, 2024a). The short timeframes also prevent significant changes between plans to be informed by technical engagement and scientific, infrastructural and policy progress (EPA, 2024c). Reducing the frequency of such plans and focusing instead on delivering concrete actions could speed up progress towards targets.
Ensuring consistency across sectoral plans and further clarifying the framework for sectoral carbon budgets would also improve implementation. It is not transparent to most energy users or entities how their operations and associated emissions count towards the relevant sectoral emission ceilings and how overall management of the ceilings is being coordinated (CRU, 2023). For example, more clarity is needed on whether emissions assessment of a development is to be carried out at the planning stage and what assessment is required post-planning approval (e.g., how and by whom are emissions measured and monitored throughout the life of an asset/project). Hence, improved guidelines and guidance on the framework should be provided.
As highlighted in the 2022 OECD Economic Survey, given the major investment needs (retrofitting, infrastructure for renewables), planning and permission delays (Chapter 4) and labour and skill shortages (Chapter 2) can be potential barriers to meeting climate goals. For example, estimates suggest that 50 000 additional workers will be needed in the construction sector from 2023 to 2030 to meet the housing and retrofitting targets, of which 45% are for retrofitting (DFHERIS, 2022). Meeting the offshore wind targets can require at least 19 500 full-time equivalent employees up to 2030 (Wind Energy Ireland, 2024). The recommendations of the Expert Group on Future Skills Needs on boosting green skills to promote renewable energy, residential retrofits and electric vehicles should be followed through (EGFSN, 2021).
Fossil fuels make up most of the energy mix, with natural gas, of which 70% was imported in 2022, accounting for around one third of total energy supply. Ireland also experienced significant tensions over electricity supply in 2022, and concentrated energy infrastructure links (gas and electricity) with the United Kingdom create risks. Ongoing plans to increase interconnectors, beyond the current two (with Northern Ireland and Wales), with four more planned, including that with France to be completed in 2027, are welcome. Ireland published its first energy security strategy in November 2023, which emphasises moving from an oil- and gas-based energy system to an electricity-led system, maximising the renewable energy potential, flexibility and being integrated into Europe’s energy system (DECC, 2023). Plans to decrease gas dependency via biomethane and low-emission hydrogen are progressing, as Ireland has the potential to replace about 20% of its natural gas consumption with biomethane (EC, 2023), but the trajectory of growth in their production remains uncertain (IEA, 2025). Improved flexibility and demand management in the electricity sector and acceleration of renewables are key in the near term. All investment in energy generation should be subject to cost-benefit analysis to ensure value-for-money in meeting targets.
A significant challenge is balancing the increasing immediate demand for energy due to economic growth, including expanding digital infrastructure (DETE, 2022), and meeting climate targets. Indeed, electricity demand increased by 11% in Ireland, compared to a fall of 7% in the European Union, between 2018 and 2023 (EMBER, 2024). Service sector buildings account for around half of electricity demand (Figure 3.3, Panel A), with data centres consuming 21% of Ireland’s electricity in 2023, a four-fold rise from 2015 (CSO, 2024; Box 3.1). Furthermore, energy demand is forecasted to grow significantly by 2032 (Panel B), driven by data centres and the electrification of heating and transport. Until sufficient renewable energy generation and appropriate infrastructure are in place, meeting climate targets will be challenging.
Ireland currently has 82 operational data centres, 14 under construction, 40 whose planning has been approved and 12 that applied for planning (Bitpower, 2023), with most of them clustered around the greater Dublin area. In late 2021, the Commission for Regulation Utilities issued directions to EirGrid and ESB (electricity and energy operators) networks to assess any new applications from data centres against several criteria: the location of the proposed data centre; the ability to install onsite dispatchable generation and/or storage capacity at least equivalent to the demand of the data centre; the ability of the data centre to provide demand flexibility, if needed, by using their dispatchable capacity; and by reducing consumption to support security of supply and avoid system alerts. Since then, EirGrid has imposed a de facto stop on connecting any new data centres to the grid in the Greater Dublin Area until 2028, which is not applicable to those that have already received their permits.
Source: IEA (2025), Energy Policy Review, forthcoming.
Improvements in demand management should be prioritised as Ireland’s electricity system currently has limited demand flexibility (CRU, 2023). A quick completion and accelerated implementation of the Electricity Demand Side Strategy, which was delayed from 2022, are key. This should take into consideration the ongoing consultation process on the connection policy for large energy users to the electricity and the gas grid (CRU, 2024). One option under consideration is the requirement that data centre applicants can provide onsite generation and/or storage equal to or greater than their demand. This can create the risk that high on-site emission generation is utilised to meet the envisaged target of 15-20% demand flexibility by 2025. It will be important to ensure that this flexibility is achieved primarily by shifting demand to times when carbon emissions are low, for example via price incentives (CCAC, 2024b).
Note: In Panel B, electricity demand projections assume that Climate Action plans are 100% met relative to electric vehicles (845 thousand passenger and 95 thousand commercial EVs by 2030) and heat pumps (650 thousand residential and 50 thousand commercial heat pumps by 2030). Data centre and new technology load energy demand is assumed to reach 1 543 MVA by 2032 from 734 MVA in 2022. Real GNI and personal consumption are assumed to grow by 3.0% and 2.5% per annum in 2024-32. Residential refers to electricity consumption for cooking, water heating and electricity use for home appliances.
Sources: IEA (2023), World Energy Balances; and EirGrid (2024), Generation Capacity Statement Data.
Official and mandatory information on data centres’ exact electricity consumption and the extent of their onsite generation can improve the accuracy of energy use data and planning for future grid enforcements. All new data centre applications should be required to provide electricity data and data related to onsite generation (SEAI, 2024). The Climate Action Plan 2024 aims to implement an enhanced emissions reporting framework for electricity emissions for large energy users. The government should swiftly identify which institution should be tasked with creating and maintaining a register as part of an enhanced emissions reporting framework while ensuring the confidentiality of sensitive commercial information (IEA, 2025). Defining a trajectory for the connection of large energy users would allow the necessary grid infrastructure, generation and flexibility resources to be put in place.
Ireland also aims to improve demand management via the use of smart meters, of which 1.9 million have already been installed. However, the uptake of time-of-use or smart tariffs incentivising customers to adjust their electricity use voluntarily has been low at 330 000 households in March 2024. There is a need for a clear legislative basis to support access to smart metering data (CCAC, 2024b). The preparation of the Smart Metering Data Access Code, which would allow making consumption data available to third parties, should be prioritised. Creating the legal basis for third-party and customer access to smart meter data in real time would enable price signals to incentivise demand-side responses. The potential benefits could be further increased by requiring the installation of smart communication-enabled equipment when providing funding for heat pumps and electric vehicle charging equipment.
The share of renewables in energy supply is lower than the EU average and renewable electricity generation was around 44% in 2023, above the OECD average, but well below the 2030 target of 80% (Figure 3.4). Accelerated deployment of renewables, such as onshore and offshore wind, requires faster permitting and grid connection processes, upgrades in transmission, distribution and storage infrastructure, as recommended in the 2022 OECD Economic Survey (OECD, 2022a), and a more efficient appeals and judicial review process. The planning of grid extensions should strike a balance between the available renewable energy potential and the projected grid costs. Efforts to strengthen public acceptance of the infrastructure needed for the energy transition by engaging actively with citizens, explaining the benefits of and the need for the infrastructure should also be continued. The Planning and Development Act 2024 (Chapter 4) and the forthcoming transposing of the EU Renewable Energy Directive, which introduces renewables acceleration areas with shorter and simpler permitting, are expected to improve the process.
Note: Provisional 2023 estimates in both panels.
Source: IEA (2024), World Energy Balances.
The National Planning Framework (NPF) provides the general policy framework for the alignment of local and county development plans and local authority climate action plans to mandated national targets. However, some local authority climate actions have limited or no spatial mapping or specific targets for renewable electricity (CCAC, 2024b). Ensuring that trickling down of the revised NPF to lower levels of government is speedy, with the provision of sufficient zone areas at the county level, will be key.
Ireland’s offshore wind industry is set to undergo a major transformation, with ambitious targets to install 5 GW of offshore wind energy capacity by 2030, up from less than 0.1 GW in 2023. Progress has been made with the award of the first Maritime Area Consents under the new Maritime Area Planning Act at the end of 2022, the first offshore renewable electricity auction in April 2023 and publication of the Offshore Wind Industrial Strategy in March 2024 (DETE, 2024).
Investment in supporting infrastructure for the development of offshore wind should be accelerated to reach targets. However, the existing port infrastructure does not have the facilities and capabilities to support such development, with Belfast the only port fully equipped to serve as a construction base for offshore wind farms (Wind Energy, 2022). Funding and skill gaps and planning delays can also be important barriers (IEA, 2025). Hence, the establishment of a panel of marine and offshore renewable energy consultants at An Bord Pleanála (the national planning body) is welcome (CCAC, 2024b). Prioritising planning applications related to renewable energy, including port infrastructure, could also help. The National Ports Policy, expected in 2025, should assess the opportunities to attract the necessary finance to the sector, increase marine planning capability and capacity, and introduce measures to upskill and diversify the maritime labour force to support the development of offshore wind projects (IEA, 2025).
Land-use and agriculture
Agriculture accounts for more than a third of GHG emissions, second only to New Zealand among OECD countries. Emissions are dominated by methane and nitrous oxide from livestock farming and the use of nitrogen fertilisers. Agricultural emissions are projected to decrease by only 1% and 18% from 2022 to 2030, under existing and additional measures scenarios, respectively (EPA, 2024a). The mitigation measures outlined in the agricultural “Marginal Abatement Cost Curve” (Teasgasc, 2023) can help lower emissions. These include the management of and reductions in the use of nitrogen fertilisers, a reduction in the average finishing age of cattle, the use of feed additives to reduce enteric methane in half of dairy cows and the uptake of diversification options to displace 140 000 livestock units. This will require providing appropriate incentives and support, including advisory services, training and resources (CCAC, 2023a).
The current policy mix focused on increasing production efficiency could be complemented with pricing instruments (see below), as recommended in the 2022 OECD Economic Survey, but may face measurement and political economy challenges. For example, New Zealand’s plans to tax agricultural emissions have been delayed until the right technology (better on-farm measurement and techniques to reduce emissions) becomes available (OECD, 2024a). Hence, improving on-farm measurement of emissions and continuing R&D to develop emission reduction technologies and inventory adjustments are key to prepare the groundwork for pricing of agricultural emissions. Transitory compensation measures could help maintain farmers’ income security and improve acceptance (NESC, 2023). Another example is Denmark, where a carbon tax will be introduced on emissions from livestock (Carbon Brief, 2024).
Net emissions for the land use, land-use change, and forestry (LULUCF) sector increased significantly in 2023 and are projected to rise by 23% between 2022 and 2030, even with additional measures (EPA, 2024a), making it challenging to achieve the EU emissions reduction target for the sector. The abatement plans in the National Climate and Energy Plan (DEEC, 2024) need to be fully implemented. As a priority, the ongoing Land Use Review to ensure optimal land-use options, including a clear and detailed implementation plan, should be completed (CCAC, 2024c).
The rate of afforestation, which has been the major policy measure to increase the sink capacity in the LULUCF sector in the past, remains well below the annual 8 000 hectares target, with 1 651 hectares planted in 2023, despite improvements in administrative processes and incentives. Estimates suggest that 18 000 hectares per annum are needed to meet the 2050 targets (O’Donoghue, 2022). The uptake of afforestation schemes has declined since 2013 and the gap between approvals and implementation remains high (DAFM, 2024a). The new Forestry Programme 2023–27 (EUR 1.3 billion), launched in April 2024, aims to increase Ireland’s forest cover from 11.6% in 2022 to 18% (DAFM, 2024b). The government should swiftly put in place the necessary resources to streamline and accelerate processes to implement the new programme (CCAC, 2023a). Efforts to overcome the cultural preferences for land use by farmers and local communities should also be continued (Henderson, Frezal and Flynn, 2020).
Incentives for afforestation could also be improved via pricing mechanisms. Under New Zealand’s emissions trading scheme (ETS), farmers and firms can earn credits for carbon removals generated by forests they own and firms can buy credits generated by forest removals. Using forests to offset methane emissions could be considered in Ireland as biogenic methane has a far more powerful heating effect but also is a shorter-lived gas than CO2 and therefore better matched to the lifetime of many tree species. A well-designed and correctly priced system can create the right incentives. For example, the New Zealand system faces some challenges as forest generated credits can also be used to offset other types of emissions by firms and there are no limits on the quantity of afforestation units that may enter the ETS market (OECD, 2024a). Hence, it is welcome that Ireland is developing a domestic framework, following the 2024 EU provisional agreement on the Carbon Removals and Carbon Farming Regulation, which created the first EU-wide voluntary framework for certifying carbon removals, carbon farming and carbon storage in products.
Transport
Transport emissions need to decrease significantly to achieve the 2030 target of roughly halving emissions relative to 2018, which is projected to be missed even under the additional measures scenario (EPA, 2024a). Ireland has plans to decarbonise the transport sector by adopting an “avoid-shift-improve” approach to reduce the need for travel, shift to more efficient transport modes (public transport, walking and cycling), and improve the energy efficiency of vehicles. While the increases in public transport journeys and the licensing of new electric cars from 16 000 in 2022 to 23 000 in 2023 are steps in the right direction, challenges remain, partly due to dispersed and low population density and travel preferences. In 2023, there were around 93 000 electric vehicle (EVs), but reaching the target of 845 000 EVs by 2030 will require a faster transition. Furthermore, the targets for EV deployment and modal shift might need to be revised up given strong population and economic growth. Hence, intermediate milestones on implementation should be set to allow the adoption of corrective measures, if needed (IEA, 2025).
Ireland has committed significant funding to support low-emission vehicles through the National Development Plan (almost EUR 500 million for the period 2021-25) and the Climate Action Fund. EVs benefit from a lower rate of the annual motor tax and vehicle registration tax. In 2023, EUR 110 million was allocated to grants for EV purchases and support for charging infrastructure. The subsidies for EVs have become more progressive with the introduction of caps and restrictions on lower-cost vehicles (OECD, 2022a). The number of charging stations is relatively low at around 3 000, with low recharging power per vehicle (EAFO, 2024). The planned schemes to support the roll-out of publicly accessible EV charging infrastructure should be accelerated to ensure that the charging infrastructure keeps up with the expected growth in EVs (IEA, 2025). It will also be important to encourage and enhance private sector participation to ensure the development of a competitive market for en-route EV charging (NCPC, 2024).
In March 2024, the government launched a new demand management strategy to improve the efficiency of the transport system (Department of Transport, 2024a and b), reflecting the conclusions of a 2022 OECD review that highlighted the need for a transformation of the sector (OECD, 2022b). This will complement existing measures, such as support for transition to EVs and investment in public transport. The draft plan focuses on creating a ‘polluter pays’ taxation principle, giving local authorities the ability to tailor plans to their specific needs, and improving the efficiency of the freight and haulage sector. Speedy implementation will be crucial to realign transport policies to reduce private car ownership and facilitate the use of low-or no-carbon travel alternatives, as recommended in the 2022 OECD Economic Survey.
To reach climate and housing targets, enhancing the coordination of housing, urban and transport policies is key. The planned improvements to the public transport system should be delivered in full and on time to support a behavioural shift away from cars to reach the target of reducing the share of daily journeys made by private cars from over 70% in 2022 to 50% in 2030. To prevent urban sprawl, the draft revised NPF has a compact growth target of 30-50% of new homes within the ‘existing built-up footprints’. There are some proposals that targets should be increased for environmental reasons (Expert Group on NPF, 2023; CCAC, 2023a), but this would need to be complemented with a regulatory environment, including an efficient planning system, to support so-called “brownfield” housing development (Chapter 4).
While improving public transport should be the main priority, one policy option to reduce car travel could be the introduction of congestion or distance-based charges (OECD, 2023a and 2021; CCAC, 2023a). Congestion charging is an efficient demand-side instrument to curb peak-time congestion and can reduce environmental externalities from private passenger transport (ITF, 2018). Besides its environmental impact, it can also support fiscal sustainability (Commission on Taxation and Welfare, 2023), as additional tax revenues will be needed, with a full EV fleet and the loss of fuel taxes potentially reducing revenues by 8% (Parliamentary Budget Office, 2021). To increase public acceptability, the distributional impact will have to be considered carefully, especially given the large urban sprawl and lack of adequate public transport in some areas (OECD, 2023a; Lindsey et al., 2023).
Buildings
Emissions in the building sector decreased by 7.1% in 2023, due to high heating costs, a mild winter and some energy efficiency improvements, but a significant roll-out of decarbonised heating systems will be needed to sustain these reductions (CCAC, 2024d). Emissions from the residential sector (around 60% of total emissions from buildings), driven mainly by a high reliance on fossil fuels, in particular the use of oil in space heating, are elevated (Figure 3.5). Ireland has targets of retrofitting 500 000 homes to a building energy rating (BER) of B2 by 2030, installing 400 000 heat pumps in existing homes to replace less efficient heating systems by end-2030, and attaining Near Zero-Energy Building standards by 2025 and Zero-Emission Building standards by 2030 for new buildings.
Source: IEA, Greenhouse Gas Emissions from Energy database; IEA, Extended World Energy Balances database 2023; IEA, Energy End-Uses and Efficiency Indicators.
Ireland’s retrofit policy includes support to ease the financial burden of retrofitting, including a new lower VAT on heat pumps, improved data collection through smart meter rollout and prioritised grant support for the least energy-efficient dwellings. Retrofit uptake has been increasing steadily, with the installation of 10 596 heat pumps and upgrading of 132 721 homes (of which 36 126 reached BER B2) between 2019 and 2023. However, the number of B2-equivalent upgrades would need to increase to 75 000 per year from 17 601 in 2023 to meet 2030 targets. Achieving these ambitious targets will face challenges from both demand and supply perspectives, in terms of capacity in the construction sector and households’ willingness. The introduction in 2022 of a one-stop shop scheme offering a start-to-finish project management service, including access to financing, is welcome. Ensuring that this scheme keeps up with demand by expanding the pool of registered service providers will be essential to achieve retrofitting targets (CCAC, 2024d). Waiting times for free upgrades for vulnerable households have declined from 27 months in 2022 to 20 months in 2023, while project completion times range from five to eight months for the other schemes.
Ireland has a number of grants targeted to the most vulnerable households (around 60% of the total retrofitting budget) and approved housing bodies, and recently launched the Home Energy Upgrade Loan Scheme. Some schemes (e.g. the Warmer Homes Scheme and the Local Authority Energy Efficiency Upgrade Programme) target poorly-performing homes. However, some cohorts who live in less efficient dwellings (elderly, people with a disability) may not meet the criteria for fully-funded upgrades and further financial mechanisms are needed for those just above the threshold for energy poverty who cannot afford a deep retrofit (CCAC, 2024d). Energy performance certification applies to new buildings and those for rental or sale and is being extended to buildings undertaking renovations as part of the EU Energy Performance of Buildings Directive. In 2023, 57% of domestic buildings had a BER certificate. Certifications should be made mandatory for all buildings, which can help target worst-performing buildings. The renovation of old houses with the lowest energy performance, which tend be heated by oil or solid fuels, such as peat, wood or coal, should also be prioritised.
District heating can help decarbonise the building sector (Hoeller et al., 2023; Box 3.2). In 2021, district heating accounted for less than 1% of Ireland’s heating needs, while it has the potential to supply as much as half of heating demand in buildings (SEAI, 2022a). In Dublin, 87% of heat (538 983 homes and 41 394 businesses) could be supplied through district heating by 2050 (Codema, 2021). Building on the mapping of Ireland’s heat and demand potential for district heating (SEAI, 2022b), feasibility assessments of the most suitable places to establish cost-effective district heating networks should be conducted. As implementing a district heating network requires substantial infrastructure development and financial investment, it will be important to set up the legislation and governance framework swiftly. This should include a regulatory framework to utilise the potential for cost-efficient heating from low-carbon energy sources (IEA, 2025). In addition, how capital expenditure for the network infrastructure can be mobilised and district heating network deployment might interact with other major infrastructure projects should be clarified (CCAC, 2023a).
An important element will be the mapping of potential heat sources, especially waste and renewable energy, to be compliant with European Commission directives on “efficient” district heating. Data centres can be designed to capture waste heat for distribution and reuse (Pärssinen et al., 2019), as is the case in Denmark and Finland. Waste heat from a data centre has been used successfully at the Tallaght district heating scheme in Ireland, but most of the potential from its large data centres remains untapped and should be used to increase the use of cost-efficient waste heat in district heating networks. Large energy users, including data centres, could be obliged to supply their excess heat to local communities to support district heating schemes, while the heat demand mapping can be used to guide the planning of the location of large electricity consumers.
District heating systems – i.e., systems that generate heat in a centralised location and then distribute it to residential buildings, businesses and industry in a local area – are powerful tools for decarbonising buildings. Modern district heating networks with low operating temperatures can effectively integrate up to 100% of renewable sources to supply energy efficient buildings. Additionally, compared to individual heating systems, district heating systems benefit from economies of scale, which result in lower production costs. This implies that when transitioning to renewable energy sources, upfront investment costs and CO2 abatement costs are reduced.
Central Stockholm has one of Europe’s largest district heating and cooling systems, with a distribution system of 3 000 km. Close to 90% of the city’s buildings are connected to the district heating network, which uses several innovative energy sources, such as excess heat and wastewater. The district heating technology, which has been in operation since the late 1870s, has evolved over time, giving rise to improved energy efficiency, lower operating temperatures, better storage and facilitated integration of renewable energy sources, such as geothermal heat or biomass.
Source: Hoeller et al. (2023).
There is room to make carbon taxation more uniform across sectors and strengthen the polluter-pays principle. Environmental taxes at 0.9% of GDP (1.6% of GNI*) in 2022 were lower than the EU average of 2% of GDP. The carbon tax, currently at EUR 63.5 per tonne of CO2 emissions and set to gradually reach EUR 100 by 2030, will support price signals, despite the temporary decreases in fuel excise taxes to help households and businesses to cope with the energy shock (OECD, 2023b). The revenues (EUR 3 billion between 2019 and 2023 and projected at EUR 8.8 billion over 2024-30) are being used for retrofitting, targeted social welfare payments to address fuel poverty, just transition and sustainable agricultural practices (Government of Ireland, 2024b). In 2022, energy (including transport fuels), transport and pollution and resource taxes accounted for 61%, 39% and 0.4% of total environment taxes, respectively (CSO, 2023). Across sectors, total environment taxes were split among households (56%), services (31%), industry (11%) and agriculture (1.3%). Carbon pricing is highly uneven across sectors, reducing incentives to reduce emissions (Figure 3.6). Carbon prices and tax polluting activities should be further aligned in line with their environmental impacts, accompanied by compensatory measures for vulnerable households.
Sectoral distribution of net effective carbon rates, 2023
Note: See Garsous et al. (2023), “Net effective carbon rates”, OECD Taxation Working Papers, No. 61 for the methodology.
Source: OECD (2024), Pricing Greenhouse Gas Emissions 2024: Gearing Up to Bring Emissions Down.
Fossil fuel subsidies accounted for EUR 3.5 billion in 2022, of which diesel for transport use accounted for the largest share (OECD, 2023c). For example, the lower excise tax rate on diesel compared to petrol, with a gap of 9.6 cents per litre and estimated foregone revenues of around EUR 400 million per year (Department of Finance, 2024), undermines the environmental impact of the carbon tax (IEA, 2025; Commission on Taxation and Welfare, 2023). Removing seven major fossil fuel subsidies could reduce emissions by 20% by 2030, with a modest impact on GDP and households (Bruin and Yakut, 2023). Hence, the 2023 review of climate harmful supports, including fossil fuel subsidies (Kevany and Foley, 2023) and the commitment to developing a roadmap for transition away from fossil fuel tax subsidies in the transport sector are welcome. The phase-out of fossil fuel subsidies should be implemented swiftly, given that transport is the second-largest source of emissions.
Recent extreme weather events in Ireland (2023 being the warmest year and July 2023 being the wettest July on record) and projected increases in such events (Figure 3.7) highlight the importance of adaptation policies. The main risks in Ireland are increased sea levels, frequency of storms and intense precipitation events, with associated flooding and damage to agriculture, the built environment and infrastructure (EPA, 2024d). More than half of the population lives near rivers and coasts, where risks are the highest. Ireland had EUR 3.5 billion in losses and 68 fatalities due to extreme weather and climate-related events between 1980 and 2022 (EEA, 2023). Additional fiscal costs due to more frequent and adverse extreme weather events (flooding and wildfires) could be around EUR 0.5 billion (0.2% of GNI*) (Casey and Carroll, 2023). The government has allocated EUR 1.3 billion over 2021 to 2030 under the National Development Plan to flood risk management measures to lower the risk of damages (OPW, 2024).
Ireland’s adaptation policies have been progressing with the publication of the second national adaptation framework (NAF) and local authority climate action plans in 2024. The new NAF has increased its focus on mainstreaming adaptation policies across existing and new plans and cooperation across sectors (Government of Ireland, 2024c). As implementation of adaptation policies has been slow and fragmented in the past (EPA, 2024d; CCAC, 2023b), ensuring implementation will be key. The new framework should also be complemented with more comprehensive and consistent reporting on cost and investment needs for adaptation. For example, a national climate damage risk register could be established to monitor the financial and spatial impacts of extreme events in a uniform and standardised manner.
Source: Climate Ireland.
As Ireland’s adaptation framework is less centralised than its EU peers’, the 13 sectoral adaptation plans, to be finalised by September 2025, need to be ambitious and effective and include performance indicators to measure progress (CCAC, 2024e). Each government department is responsible for ensuring that project proposals align with environment goals, but lack of coherence and consistency across sectoral policies is a risk. Hence, the plans to facilitate inter-sectoral dialogue, including through the National Adaptation Steering Committee, are key. The new NAF has added two new sectors, tourism and building and planning, although a formal adaptation plan for the latter is delayed until a scoping exercise is conducted. Including business sectors, beyond the current agri-food and seafood and tourism sectors, such as financial and business services, should also be considered (Deignan et al., 2019; EPA, 2024e).
Effective reporting on implementation and evaluation are key to cost-efficient adaptation policies (OECD, 2024b). The Climate Change Advisory Council’s scorecard for progress of sectoral adaptation plans has identified gaps in some sectors due to insufficient data and human and financial resources, and an overall lack of measurable targets, costed actions and key performance indicators (CCAC, 2024e). A methodology was recently developed to create indicators for the transport sector (only national roads and light rail so far), but implementation will not be immediate and will require further consultation and identification of the necessary resources (EPA, 2024f). An assessment of this pilot study has identified some lessons for other sectors, which will be obliged to develop indicators according to the new NAF. These include the need to start the process early, benefit from international best practice, identify future data needs and ensure proper resourcing (EPA, 2024f). Recent evaluation reports, including from Finland and the United Kingdom (Government of Finland, 2021; Committee on Climate Change, 2021) may help inform Irish adaptation policies by illustrating implementation and evaluation challenges.
Ireland’s major cities are all on the coast and the share of the population living in coastal areas has increased to 62%. Likewise, much of Ireland’s industry and general infrastructure, notably power stations, communications and transport hubs, are coastal. The sea level around Ireland has risen by approximately 2 to 3 mm a year since the early 1990s. Scenario analysis suggests that the cost of flood damage at Limerick City and Environs could go from EUR 83 million in 2019 to EUR 1 billion (OPW, 2019). Hence, a strong emphasis on the protection of the coastline is needed. Following the publication of a scoping report (DHLGH, 2023) and the establishment of an Inter-Departmental Working Group, the development of Ireland’s first National Coast Management Strategy should be prioritised (CCAC, 2024e).
While the adaptation plan of the transport sector will improve the climate resilience of new transport network investments, ensuring the resilience of the existing network is also crucial (Barrett and Curtis, 2024). Ireland currently lacks a common risk assessment approach to inform adaptation planning for transport infrastructure owners and operators, and local authorities to help determine adaptation planning and justify associated costs (OECD, 2021). This requires filling the information gaps about exposure and vulnerabilities of transport infrastructure to climate hazards and conducting a full priority impact assessment to identify critical national assets and costs of adaptation actions. Hence, the assessment of road drainage systems and the ongoing development of the National Climate Change Risk Assessment framework, which will feed into the forthcoming adaptation plan in the transport sector, set to be completed by September 2025, are welcome.
Information on climate threats can be provided to communities and policymakers through climate risk assessments and vulnerability maps (OECD, 2024b). By examining factors such as construction materials, age, maintenance practices and retrofitting measures, areas where buildings may be particularly susceptible to climate impacts can be identified to prioritise interventions (Scott and O’Neill, 2022). For example, information on flood risk can be provided by certifications akin to energy efficiency certificates as in Germany or requirements by sellers to disclose information on compensation paid in the past due to a natural disaster as in France (Oakley and Ahern, 2020). Ireland’s National Meteorological Service is creating climate maps to guide the design and construction of future building projects (Met Éireann, 2023), which should be reflected in building regulations to enhance resilience. The planned scoping exercise should be conducted swiftly to pave the way for the preparation of the sectoral plan.
Natural catastrophe insurance is provided only by the private sector in Ireland. Such insurance is voluntary but mandatory for new mortgages as part of the real estate property insurance. Estimates suggest that Ireland has among the lowest insurance protection gaps in the European Union for floods, but the gap is higher for coastal floods (EIOPA, 2022; Radu, 2022). Nevertheless, there exist some small pockets of vulnerabilities for overall flood insurance, with around one out of 20 buildings likely to have difficulty accessing flood insurance today, and flood protection is relatively concentrated geographically (CBI, 2024). The majority (89%) of the cost of inland flooding arises for buildings with limited access to insurance, as insurance companies typically exclude flood cover for properties in high-risk flood zones. The government provides emergency support through the Humanitarian Assistance Scheme, an income-tested scheme, in case of severe weather events, such as significant flooding.
Greater collaboration between the government and insurance companies is needed to quantify climate-related risks and to collect and share information. While insurance companies see climate change as a major risk, further work is required in order to fully integrate climate risk into risk management frameworks, including stress testing or scenario analysis (CBI, 2021). Hence, the issuance of the guidelines for insurance companies by the Central Bank of Ireland is welcome (CBI, 2023). Data availability and limitations in risk models and a need for staff training are the biggest challenges and should be addressed (Climate Forum, 2024a and 2024b). Identifying segments that may have difficulty obtaining insurance protection, and are therefore financially vulnerable, as was done recently for flood insurance by the Central Bank of Ireland, would help inform adaptation priorities. A government consultation process found that making flood insurance mandatory could lead to insurers pricing prohibitively for high-risk properties, an increase in the pricing of low-to-medium risk properties and the risk that insurers decide to withdraw from the market (Oireachtas, 2024). Nevertheless, making insurance against disaster risks (especially flooding) mandatory could be considered, alongside establishing a national catastrophe insurance programme as in France and Switzerland. These programmes often benefit from government co-insurance, reinsurance or a guarantee (ECB and EIOPA, 2023). A state guarantee ensures that damages from extreme events can be covered. An advantage of the French system is that it provides complete coverage and affordable premiums while keeping a large role for private insurers, with benefits in terms of cost effectiveness.
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