Written by Ireland’s Department of Finance

Follow us on Linkedin

By aligning economic tools with climate goals, Ireland’s Department of Finance is applying public finance rooted in budgets and taxes, and most importantly, in long-term resilience.

Climate is rapidly changing. Ireland is committed to working at home and abroad to mitigate against the worst effects of climate change and prevent catastrophic levels of global warming. As part of its ongoing policy efforts, the country has introduced a range of initiatives aimed at securing a more resilient future.

Ireland’s new Programme for Government reiterates the commitment to achieve an emissions reduction of 51% by 2030 relative to 2018 levels. In addition to international climate obligations under the Paris Agreement and the European Union legislative commitments, the domestic Climate Action and Low Carbon Development (Amendment) Act sets a statutory target of net zero emissions by 2050.  It also enshrines the 2030 target in law and establishes a framework for five-year carbon budgets and associated sectoral emissions ceilings.

The Department of Finance at the centre of climate action

The Department of Finance’s current Statement of Strategy includes “Promoting environmentally sustainable economic progress” as one of its strategic goals. In July 2020, a dedicated Climate Unit was established within the Department, followed by the creation of a Climate Economy Group in early 2022.  This group plays a role in mainstreaming climate-related policy development across the Department and in building awareness and capacity on climate issues across the various policy areas, like tax, budget/fiscal, financial services, etc. Traditionally, the Department (along with its sister Department of Public Expenditure) would focus on carbon pricing and environmental taxation measures, the shadow price of carbon in public capital projects, and the EU emissions trading schemes and compliance architecture. This focus has widened in recent years.

Ireland’s Climate Action Plan 2025 (the third statutory update to the plan and the fifth overall) sets out the measures and actions that will support the delivery of Ireland’s climate action ambition. It is the third Climate Action Plan to be prepared under the Climate Action and Low Carbon Act and the fifth overall.

Some Department of Finance actions include:

•        Monitor, forecast, and review the Carbon Tax increases as legislated in the 2020 Finance Act and other environment-related taxation reform.

•        Increase Ireland’s year-on-year International Climate Finance contribution.

•        Expand the Department of Finance’s Green Budgeting methodology from a tax perspective to include all six EU Taxonomy for Sustainable Activities based on the EU Green Budgeting Reference Framework and the OECD Green Budgeting Framework.

• Explore tax and regulatory measures to support the adoption of energy audit recommendations and the installation of energy-efficient equipment.

Ireland’s Carbon Tax sets out a long-term trajectory of multiannual rate increases, aiming to reach a rate of €100 per tonne of CO2 in 2030. It operates on a “polluter pays” principle and applies to carbon dioxide emissions in the heat and transport sectors, covering fuels such as petrol, diesel, kerosene, gas oil, liquid petroleum gas, fuel oil, natural gas, and solid fuels.  Since 2020, the Government has allocated additional Carbon Tax revenue into a Climate Action Fund. This fund supports Just Transition measures, e.g. initiatives to prevent fuel poverty, socially progressive retrofitting and investment in green agricultural projects.

Budget 2025’s The Use of Carbon Tax Funds paper provides further details on this allocation. Green Budgeting analysis is now a key part of the Budgetary framework and has been published annually since the first Green Budgeting paper was released on Budget Day 2022. It provides an evidence base and reflects the link between how tax and tax expenditure measures can influence individual and business behaviours towards supporting climate and environmental goals.  Overall, the analysis indicates a trend towards the budgetary process becoming more climate friendly with Carbon Tax playing a significant role in driving this shift. Latest analysis was published as part of Budget 2025: Beyond GDP - Quality of Life Assessment and gov.ie - Green Budgeting (www.gov.ie)

Ireland undertakes a range of activities to address the current global challenges affecting the mobilisation of private finance for sustainable investments. The Department of Finance published an “Ireland for Finance” strategy with activities detailed under five themes, one being Sustainable Finance, which raises awareness of the need to finance investments in the green transition.

Regarding funding, acting through the National Treasury Management Agency, Ireland issues Irish Sovereign Green Bonds, the proceeds from which are allocated against eligible green projects upon which the State is engaged and planning for the coming years. Over €11 billion of these bonds have been issued to date. Proceeds from these issuances are allocated for eligible green projects, which generate a positive environmental benefit.

To further support Ireland's transition to a sustainable and climate-resilient future, the Government introduced the Infrastructure, Climate and Nature Fund (ICNF) in Budget 2024. The ICNF will support environmental projects that reduce greenhouse gas emissions, improve water quality, and enhance biodiversity. By the end of 2025, €4 billion will have been transferred to the ICNF. Additionally, the Future Ireland Fund (FIF), also announced in Budget 2024, aims to ensure long-term fiscal sustainability by addressing future challenges such as an aging population, climate change, and digital transformation. Each year until 2035, the Government will contribute 0.8% of GDP to the FIF.

By embedding climate considerations into core fiscal processes, from taxation to budgeting, sovereign debt issuance to long-term investment planning, Ireland is investing in future economic resilience. The country’s experience illustrates a broader lesson for governments everywhere: the green transition is a structural shift -and the sooner finance ministries embrace that reality, the better prepared their economies will be.

In 2025 countries need to submit their enhanced national climate plans under the Paris Climate Agreement to the UNFCCC, called the Nationally Determined Contributions (NDCs). Where previous NDCs focused mainly on setting ambitious climate targets, the focus of this third round of NDCs has shifted to close the mitigation and adaptation implementation gap. To ensure full and adequate implementation of countries’ climate goals, effective financing and investment planning is essential. Finance ministries play a unique and essential role in designing, planning and implementing more ambitious, credible and investment-ready NDCs 3.0.

Developing Investable and Implementable NDCs

At the COP28 climate summit, the first Global Stocktake stated that the world is not on track to meet the long-term goals of the Paris Agreement. In 2024, global average temperature exceeded 1.5 degrees Celsius for the first time. A decade after the adoption of the Paris Agreement, countries will need to submit their third round of Nationally Determined Contributions to the UNFCCC. Although the formal deadline was 10th February 2025, currently only 23 countries have submitted their NDC, and the bulk of submissions is expected ahead of COP30 in Belém, Brazil. Whereas previous rounds of NDCs focused on setting ambitious mitigation targets, for the NDCs 3.0 countries are also shifting their focus to more effective implementation. As countries submit their NDCs, there is a major opportunity for Ministries of Finance (MoFs) to use their instruments, expertise and convening power to effectively contribute to, and support Ministries of Environment and Climate, in enabling and accelerating implementation and financing of the NDCs 3.0, as the Coalition of Finance Ministers for Climate Action (CFMCA) emphasized in its Climate Action Statement 2024.

NDC Investment or Financing Strategy

An important tool to mobilize climate finance are NDC investment or financing strategies. Investment and financing strategies are supporting documents to the NDC, and should quantify the NDC financing needs, include an analysis of the enabling environment, outline possible financing sources, highlight clear climate investment opportunities, and develop a pipeline of bankable projects. To date only 16 countries have published such a strategy, presenting a clear opportunity for many MoFs to engage more actively with their country’s NDC. Developing these strategies through stakeholder engagement can identify and reduce investments barriers and promote buy-in for the climate plan across society. As MoFs are in contact with key economic stakeholders, they are uniquely positioned to develop these investment or financing strategies. Several CFMCA members are already developing such a strategy including Seychelles, Morocco and Chile.

Mainstreaming NDCs in Core MoF Frameworks 

The NDC investment or financing strategy should outline sources for mobilizing climate finance, including through domestic public expenditure and regulation, private capital mobilization, and international financing and support. For domestic public expenditure, the MoF can incorporate climate-budget tagging in national budget systems to provide an overview of existing public climate expenditures and identify opportunities to further redirect public expenditure towards climate action. Climate-budget tagging is a method employed by countries in all regions of the world including Serbia, Rwanda, and Uruguay. Through domestic policies, MoFs can create an enabling environment that fosters climate investments, including by identifying and addressing investment barriers and creating regulatory and fiscal incentives. Examples include Ghana’s tax incentives supporting renewable energy projects as part of the Energy Sector Strategy and Development Plan. And Singapore, for example, introduced a carbon tax, does not provide fiscal incentives fossil fuel use, and imposed excise duties on petroleum products. Cyprus introduced green tax reform including a carbon tax for fuels in non-ETS sectors.

Mobilizing Private Finance 

Finance ministries have financial levers that they can use to drive private investment towards climate projects outlined in the NDC investment strategy. Countries with sufficient fiscal space and institutional capacity can use a range of blended finance instruments such as debt instruments, subordinated positions, and guarantees which can derisk projects and mobilize additional private investments.

Several MoFs are using blended finance initiatives to support the transition to clean energy including the UK which launched a Net Zero Blended Finance Project, and Singapore’s ‘Financing Asia’s Transition Partnership’. Fiscally-constrained finance ministries can also play a role in attracting concessional financing through bilateral channels or the Multilateral Development Banks (MDBs) which can also contribute to derisking climate projects. Further, MoFs can introduce sustainable or green taxonomies to help align investments with long-term climate or sustainability goals. Many countries around the world have introduced a sustainable or green taxonomy including EU member states, Malaysia, Mexico and Uzbekistan.

Coordination of Climate Finance Mobilization 

To enhance access to international and private climate finance, finance ministries can establish climate finance units (CFUs) as a dedicated coordination entity within their ministry. CFUs can enable climate mainstreaming into core national development and financing instruments, identify and prioritize climate investments, develop investment-ready projects, and leverage opportunities for private sector participation. Several finance ministries such as Uganda, Fiji, and Bangladesh have already established a climate finance unit, and several of these units have developed their country’s first climate financing strategy.

Another coordination mechanism that MoFs could use are country platforms. Country platforms bring together various stakeholders including ministries, private sector, and MDBs, to more effectively leverage existing resources and attract more climate finance. Through enhanced coordination, country platforms allow stakeholders to align their efforts and resources with national climate policies and strategies, especially NDCs, thereby better leveraging existing resources and avoiding fragmentation and isolated bilateral approaches. Nine platforms are established so far, including Brazil’s Climate and Ecological Transformation Investment Platform (BIP). As MoFs are in continuous dialogue with key financial stakeholders, MoFs should be central to the establishment and coordination of country platforms.

International Support for Climate Financing and Investment 

Finally, international cooperation and support can play an essential role in strengthening domestic capacities to mobilize climate finance. The Coalition of Finance Ministers for Climate Action helps countries engage in peer exchange, sharing challenges and good practices openly. Through workstreams including private sector mobilization, carbon pricing, and macro-economic policies, CFMCA members can share good practices and challenges, and learn from one another. Through a wide network of partners, the CFMCA can provide capacity building support to finance ministries around the world. And together with the NDC Partnership, the CFMCA offers finance ministries dedicated capacity building and technical assistance through the Joint Support Initiative for NDCs.

By Aoife Fleming, policy advisor of the Co-Chair team of the Ministry of Finance of the Netherlands following the Global NDC Conference 2025 in Berlin, Germany.

Subscribe to our LinkedIn Blog series