Can VAT help accelerate Ireland’s green transition?

Energy and the built environment

Where Ireland has already moved

Solar panels and heat pumps provide the clearest examples of environmentally focused VAT policy in Ireland.

Since May 2023, Ireland has applied a zero VAT rate to the supply and installation of solar panels on private dwellings. The aim was clear: lower installation costs and encourage more investment in renewable energy generation.

Heat pumps have followed a similar path. Since January 2025, qualifying low-emission heat pump systems supplied and installed under a single contract have benefited from reduced VAT treatment.

These changes matter because they lower the upfront cost of investment.

For many households and businesses, that initial cost remains one of the main barriers to acting.

Evidence of adoption

Solar adoption in Ireland has grown significantly in recent years.

Figures cited by the Parliamentary Budget Office show that more than 31,000 homes had received support through SEAI domestic solar schemes by late 2023. Almost 13,000 of those homes were supported in the first eight months of 2023 alone. 

More recent industry data suggests that over 94,000 Irish homes now have solar panels installed.

It would be wrong to credit that growth to VAT changes alone. Grants, energy prices, export payments and greater public awareness have all played an important part.

VAT wasn’t the only factor, but it lowered the upfront cost at a point when affordability remains one of the biggest barriers to household investment.

International examples worth considering

Germany introduced a zero VAT rate for qualifying photovoltaic systems and related storage technologies in 2023. The policy goes beyond solar panels and includes qualifying battery storage systems.

France has taken a different route, applying reduced VAT rates to qualifying energy renovation work and energy-efficiency improvements in residential property. [9], [10]

Both examples show how VAT can lower the cost of investments that governments already want households and businesses to make.

Budget 2027 options

If Budget 2027 is to build on the solar panel and heat pump measures, the most practical next step would be to target technologies that reduce household energy demand or improve the return from domestic renewable generation. Options could include:

• battery storage systems
• smart energy management technologies
• home energy monitoring systems
• broader retrofit-related technologies

The policy logic is straightforward: if Government wants faster adoption of specific technologies, reducing the VAT cost can make the investment more attractive.

The circular economy

Repair rather than replacement

The circular economy is becoming a more important part of sustainability policy.

The goal is simple: keep products in use for longer and make repair a more attractive choice than replacement.

That means, rather than disposal and replacement, encouraging:

• repair
• refurbishment
• reuse
• remanufacturing
• resale

Ireland doesn’t have a dedicated circular economy VAT regime, but parts of the current system already support these activities.

Existing Irish measures

Certain repair services benefit from reduced VAT treatment.

Revenue guidance specifically confirms reduced VAT treatment for bicycle repairs. 

Ireland also operates the second-hand goods margin scheme.

The margin scheme allows qualifying dealers to account for VAT on the margin earned from the resale of second-hand goods, rather than on the full selling price. Its original purpose was to prevent double taxation.

Today, the scheme also has an important role in supporting second-hand markets.

Platforms such as Vinted have helped make the resale and reuse of goods part of everyday shopping. Private individuals selling used goods online don’t operate the margin scheme themselves, but the growth of second-hand markets shows the wider economic activity that these rules can support.

The Swedish repair model

Sweden offers one of the most useful international examples.

The Swedish VAT system applies a reduced rate to certain repair services, including repairs to clothing, footwear, bicycles and household linen. The stated policy objective is to encourage repair over replacement and keep products in use for longer. 

It is one of the clearest examples of VAT being used to support circular economy goals.

Practical options for Ireland

Possible options include:

• broader reduced VAT treatment for repair services
• support for refurbishment activities
• incentives linked to remanufacturing
• a review of margin scheme rules for modern resale models
• measures that encourage the repair of consumer electronics

For Budget 2027, the strongest options will be those that consumers can easily understand, and businesses can apply in practice.

That points towards repair and refurbishment services, where the environmental benefit is clear and the VAT treatment could operate without adding unnecessary complexity.

Sustainable transport

A largely untapped area

Compared with renewable energy, VAT has played a limited role in supporting sustainable transport in Ireland.

Reduced VAT treatment for bicycle repairs is one example.

Beyond that, however, Ireland has made relatively little use of VAT incentives to encourage more sustainable transport choices.

What Norway shows

Norway provides perhaps the strongest international example.

For many years, electric vehicles benefited from significant VAT reliefs as part of a wider package of incentives designed to encourage adoption. These measures formed one part of a broader strategy that has helped deliver exceptionally high electric vehicle adoption rates. 

By the end of 2024, electric vehicles accounted for 88% of new passenger car sales in Norway. The Norwegian Government has identified tax measures and incentives as key drivers of this transition. 

Where VAT could support transport choices

The clearest opportunities are likely to be targeted measures that support lower-cost, lower-emission transport choices. These may be more affordable and easier to direct than broad reliefs. Options include:

• bicycles
• e-bikes
• cargo bikes
• bicycle and e-bike repair
• technologies linked to active travel infrastructure

Recent EU VAT reforms have given Member States more flexibility in how they treat bicycles and electric bicycles.

That doesn’t automatically mean Ireland should reduce VAT in these areas.

It does, however, give policymakers more scope to consider how VAT could support sustainable transport goals.