Cutting fuel taxation in the budget does nothing to cure the disease

Households need help to break free from home heating oil for good

An SEAI study found that 78% of existing homes are technically suitable for a heat pump even without additional energy-efficiency improvements. Picture: iStock

Mon, 05 Oct, 2026 - 06:00

Hannah Daly

My house was built in 1979, the year revolution in Iran triggered the second great oil shock of the 1970s. It belongs to the Bungalow Bliss generation of one-off homes across the Irish countryside, which are especially oil dependant.

Nearly half a century later, these homes are experiencing yet another oil shock. The cost of a thousand litres of oil was less than €1,000 before the latest conflict in the Middle East began in February, and has now risen to more than €1,600.

For households trying to fill a tank before winter, this is an enormous hardship. Those who can afford will pay. Those who cannot will go cold.

With Budget 2027 approaching, the Government is under pressure to ease this burden. It cut fuel excise on road fuels in response to fuel protests in April, that is costing the exchequer €100 million a month.

Proposals targeted at home heating oil have included cutting the carbon tax, and reducing the rate of VAT from 13.5 to 9 cent per litre.

CLIMATE & SUSTAINABILITY HUB

Cutting fuel taxation would be a weak and expensive painkiller, and do nothing to solve the fundamental disease – continued dependency on oil. The war has added about €700 to the cost of a tank of heating oil. Cutting the entire carbon tax would claw back about €180. Cutting VAT to 9% would save about €65. The market signal is far louder than taxation.

Independent experts have consistently advised government that fuel supports of this kind are not the answer.

The Just Transition Commission has advised against blanket measures, proposing instead targeted supports for households exposed to fuel poverty, and investment into lasting solutions such as retrofitting. The Climate Change Advisory Council similarly recommends accelerating retrofitting and maintaining the carbon tax, ring-fencing the revenue to support a just transition. Economic and Social Research Institute research has found that broad energy-tax cuts are expensive and poorly targeted with higher-income households receiving more of the benefit.

Energy policy is often described as a “trilemma” between climate action, energy security and affordability. For oil-heated homes, there is no tension or trilemma. Dependency on fossil fuels makes heating expensive, insecure and climate polluting. The poor quality of insulation exacerbates all three problems. Retrofitting tackles all three at once.

Some other proposals are particularly alarming. Liquid Gas Ireland, the industry body representing LPG suppliers, wants SEAI supports extended to “renewable ready” gas boilers, and money from the Infrastructure, Climate and Nature Fund to support “renewable liquid gas”.

That would substitute one form of fossil fuel dependency for another, and be a very poor use of scarce climate funding.

LPG would address precisely none of the challenges facing home heating. SEAI domestic fuel price data shows that since 2020, bulk LPG has been dearer than heating oil. And that doesn’t include the price of the LPG tank or the cost of an LPG boiler. Meanwhile, the heat delivered from a heat pump is cheaper than from a typical oil boiler.

LGI also claims that 22% of Irish homes are unsuitable for heat pumps, a statistic from the SEAI Heat Study that does not support LPG use. It found that 78% of existing homes are technically suitable for a heat pump even without additional energy-efficiency improvements, rising to 82% after fabric upgrades. The remaining homes are deemed unsuitable mainly because of space constraints, which doesn’t apply to rural one-off homes. For space-poor homes, LPG is also likely to be unsuitable.

Even more astounding is LGI’s appropriation of a “just transition” argument in making its case to retain combustion boilers in rural areas. Its proposals would leave homes with more costly fuel, locked into fossil fuels for decades, and without the health, comfort and security benefits of deep retrofitting. Emissions savings from gas of 11 per cent over oil are not worth it, while the prospect of eventually running on affordable renewable natural gas are fantastical.

None of this is to say that retrofitting rural Ireland is easy. I am living through the process myself, and even though I am lucky to have resources, it is anything but pain-free.

Heat pump grants have increased substantially, low-cost retrofit loans are available and applications for home energy grants have surged, but the pace remains far short of what is required, electricity remains too costly and many who don’t own their home or lack the capacity to undertake a retrofit are locked out of the benefits.

We are dealing with a legacy of housing that was built as if oil would always be plentiful, cheap and benign. After all this time, the lesson should be obvious.