The EU’s second Emissions Trading System, known as ETS2, is now due to become fully operational in 2028, covering fuels used in road transport, buildings and several other sectors. Hauliers themselves will not have to buy ETS2 allowances. The obligation sits further up the supply chain with regulated fuel suppliers, which will have to account for emissions associated with the fuels they release for consumption.
The concern for transport operators is that some or all of that carbon cost could ultimately be reflected in the price they pay for diesel. For a large fleet, relatively small movements in the price per litre quickly become significant. An increase of 10 cents per litre would cost an additional €10,000 for every 100,000 litres consumed. A fleet purchasing one million litres annually would therefore face another €100,000, while a 15-cent increase would amount to €150,000. However, those figures, highlighted by Irish transport publication HGV Ireland, are illustrative scenarios rather than forecasts of what ETS2 will actually add to Irish diesel prices.
Ireland has an important exemption route
Ireland’s position differs from that of many other EU countries because it already applies a national carbon tax to road fuels.
The Irish Government notified the European Commission in December 2023 that it intended to use a provision in the ETS legislation allowing countries with sufficiently high national carbon taxation to exempt regulated fuel suppliers from surrendering ETS2 allowances. The derogation can operate for the years 2027 to 2030.
However, it is not an unconditional four-year exemption. For a given year, the carbon tax actually paid by the regulated entity must be higher than the average ETS2 auction clearing price, alongside compliance with monitoring and reporting requirements. Ireland’s application is also subject to annual review by the European Commission.
The Department of Climate, Energy and the Environment says work with Brussels remains ongoing to ensure the derogation is in place for the relevant period. That means it would be misleading to assume that ETS2 will simply add a fixed number of cents per litre on top of Ireland’s existing carbon tax from 2028.
At the same time, the exemption does not remove the wider pressure on diesel costs. Ireland’s own carbon tax is designed to make fossil-fuel use progressively more expensive, while the ETS2 exemption itself depends partly on the Irish tax remaining above the European carbon-market price.
ETS2 itself starts in 2028
The EU postponed the operational start of ETS2 by one year earlier this year, meaning the system will now become fully operational in 2028. ETS2 allowance auctions are nevertheless scheduled to begin in January 2027. The European Commission has also strengthened mechanisms intended to limit excessive volatility in ETS2 allowance prices before the scheme begins.
For hauliers, however, the fundamental issue remains the cost and availability of alternatives to diesel. HGV Ireland argues that operators should not simply be penalised for continuing to use diesel in applications where a commercially workable zero-emission alternative is not yet available.
Electric HGVs are already capable of replacing diesel vehicles on some predictable regional and return-to-depot operations. Long-distance and international haulage presents a more difficult equation, involving not only vehicle range but charging availability, charging time, depot electricity capacity, payload and vehicle cost.
Government support for electric trucks has increased
Ireland has been attempting to accelerate that transition. In March, the Government expanded its Zero Emission Heavy Duty Vehicle grant scheme, allowing businesses to receive up to €500,000 per year towards qualifying electric trucks and buses.
Support is therefore becoming considerably more substantial, but buying the truck is only part of the problem. Operators also need sufficient depot power and dependable high-power charging on the routes where the vehicles will operate. For fleets undertaking international or irregular long-distance work, those requirements can make replacing diesel considerably more complicated than electrifying a predictable depot-based operation.
Diesel rebate could become part of the ETS2 debate
Ireland already has another mechanism capable of cushioning professional operators against high fuel costs: the Diesel Rebate Scheme. Qualifying road haulage vehicles of at least 7.5 tonnes can claim a repayment on eligible diesel purchases. Revenue temporarily increased the maximum rebate to 12 cents per litre between January and September 2026, compared with the previous maximum of 7.5 cents.
Under the current rules, the maximum is scheduled to return to 7.5 cents per litre from 1 October 2026.
HGV Ireland argues that the Government should consider using the rebate mechanism during the decarbonisation transition rather than allowing carbon-related fuel costs simply to accumulate for licensed operators unable to switch technology. That debate is likely to become increasingly important as ETS2 approaches.
Ireland may initially avoid having a completely separate ETS2 carbon charge layered on top of its domestic carbon tax. But maintaining that protection depends on the relationship between Ireland’s tax and the price of ETS2 allowances.
Meanwhile, hauliers face a much more practical question: how quickly zero-emission trucks and the infrastructure required to operate them can become commercially viable across the full range of road freight operations.
