Environmental funding for Irish businesses

Dr. Clare Guy, Senior Consultant in our tax practice, gives an overview of some of the national funding mechanisms available to support environmental initiatives.

Being environmentally friendly is not only good for the planet, but also for the bottom line. Businesses that adopt sustainable practices can reduce their costs, improve their reputation, and gain a competitive edge in the market. Additionally, sustainability is increasingly becoming a legal requirement, as both Ireland and the EU have set ambitious targets and regulations to combat climate change and environmental degradation.

In this article, we will explore the regulatory framework that shapes the sustainability agenda in Ireland and the EU, and briefly outline one of the funding schemes that is available to help Irish businesses become more environmentally friendly and socially responsible. 

Ireland’s Climate Action Plan 2024 outlines Ireland’s commitment to achieving a 51% reduction in greenhouse gas emissions by 2030^[1], compared to 2018 levels. The European Green Deal commits to delivering net-zero GHG emissions at EU level by 2050^[2]; with Ireland committed to achieving net-zero emissions no later than 2050. These ambitious targets require significant investment and changes across various sectors, including energy, agriculture, and transport.

For businesses, this means adapting to stricter environmental regulations and investing in sustainable practices. Companies now need to innovate and adopt greener technologies to meet these targets, which may initially increase operational costs but also open up new opportunities for growth and competitiveness in a low-carbon economy. The transition to a more sustainable business model is not just a regulatory requirement but also a strategic move to future-proof businesses against the impacts of climate change.

To meet the 51% reduction in greenhouse gas emissions by 2030, Ireland has agreed to several specific sectoral targets^[3], including:

• Electricity: 75% greenhouse gas reduction by 2030
• Transport: 50% greenhouse gas reduction by 2030
• Industry/Enterprise: 35% greenhouse gas reduction by 2030
• Agriculture: 25% greenhouse gas reduction by 2030

Meeting these target reductions is a journey which presents both a challenge and an opportunity for Irish businesses. Businesses are now encouraged to set Science-Based Targets (SBTs)^[4] and develop comprehensive company specific Climate Action Plans, covering everything from resource efficiency to supply chain, to achieve these goals and adapt to this ambition to transition to a low-carbon, circular economy. 

These measures involve measuring and reducing emissions across all scopes (Scope 1 relates to direct emissions from an organisation’s facilities, Scope 2 relates to emissions from energy purchased by the organisation, and Scope 3 emissions relates to other indirect emissions, such as those from suppliers and from the use of the organisation’s products), investing in renewable energy, improving energy efficiency, and innovating sustainable practices.

The IDA Ireland Green Capital Grant Scheme is a significant initiative aimed at promoting environmental sustainability and energy efficiency across Ireland. 

This scheme is designed to incentivise businesses to make strategic investments to improve the environmental impact of site operations, invest in projects that go beyond the minimum legal requirements and contribute to the transition to a low carbon and resource efficient economy^[11].

The Green Capital Grant supports the purchase and installation of capital items, necessary to deliver on the goals and objectives of site-specific Climate Action Plans. These site-specific Climate Action Plans must be developed prior to application for the Green Capital Grant Scheme. Incentives are designed to support multi-year projects, and to deliver impact. 

The Grant Scheme covers projects that fall under one or more of the following categories of environmental aid (the list below is non-exhaustive, and is provided to show the scope and scale of support):

• Electrification of heat via heat pumps and electric boilers
• On-site renewable generation and storage to displace fossil fuels
• Electrical charging infrastructure
• Wastewater treatment
• Energy efficiency measures in buildings and processes
• Adoption of new more efficient processes
• Hydrogen production, use and storage
• Biofuel production
• Circular economy measures
• Thermal storage

The Green Capital Grant Scheme is a mechanism under the Environmental Aid Scheme, which is effective from July 1 2023 to 31 December 2026^[12].

To date, the updated Environmental Aid Scheme (2023 – 2026) has seen IDA grants averaging €1,762,039 and Enterprise Ireland grants averaging €960,000. Previously, under the Environmental Aid Group Block Exemption Scheme which ran from 2014 to 2020 and was further prolonged to 2023, IDA grants averaged €1,402,000, while Enterprise Ireland grants averaged €2,529,599^[13].

In 2023, the European Union updated the General Block Exemption Regulation, reflecting an increased priority for Environmental Aid. The European Commission endorsed amendments to extend and facilitate the possibilities for aid in the area of environmental protection and energy, such as to support the rollout of renewable energy, facilitate investments in green hydrogen, support decarbonisation projects, increase energy efficiency or support green mobility. These changes further facilitate and accelerate support for the EU’s green transitions. The amendments were formally adopted on 23 June 2023.

The changing grants landscape with the new GBER rules has made identifying which activities qualified under the various GBER schemes slightly more complex.  This is where KPMG’s specialised Grants team can help.