AN INCREASE TO the controversial carbon tax has come into effect today, with the price rise on fuel set to be offset by a cut to the oil levy.

The tax targets heavy-emitting fuels, including oil, gas, peat and coal and the increase was announced two weeks ago in Budget 2023.

Just over two cent per litre is set to be added to the price of petrol and diesel, with the overall rate increasing from €41 to €48.50 per tonne of carbon dioxide on auto fuels.

The rate of carbon tax on all other fuels is not set to rise until 1 May 2023.

However, the carbon tax increase on the price of fuel is set to be offset through a cut to the National Oil Reserves Agency (Nora) levy.

Initially, the Government had planned to abolish the Nora levy outright but due to “technical legislative reasons’, it will remain but at a reduced rate of 0.1 cent per litre of fuel.

Previously, the rate was two cent per litre of fuel.

“For technical legislative reasons it is necessary to retain the NORA levy, and for this reason the levy rate of 0.1 cent per litre was agreed,” said a spokesperson for the Department of Finance.

This rate is set to remain in place until 28 February 2023.

Revenue from the carbon tax is allocated to climate action measures, including retrofitting, agriculture schemes, and social protection for communities affected by climate action.

Speaking to reporters after the carbon tax increase was announced, Environment Minister Eamon Ryan said it was an “appropriate measure” to cut the Nora levy and that it gives “added protection for some of those areas that are hard to reach”.

Additional reporting by Jamie McCarron