Energy and the green transition

KPMG insights – our view

The transition to a low-carbon economy will require unprecedented levels of innovation. Businesses will need to develop new technologies; rethink established processes and use energy and resources more efficiently.

Artificial intelligence 

Artificial intelligence can support that work by helping businesses forecast energy demand and usage, identify inefficiencies, optimise generation and consumption, and improve existing technologies.

Artificial intelligence is not, however, simply a climate solution. It consumes significant amounts of energy, particularly as demand for computing and data centres grows. It therefore needs to be developed and deployed responsibly, with its environmental impact considered.

That should not obscure the wider opportunity: used effectively, artificial intelligence can be an important enabler of the green transition.

Ireland has set ambitious climate goals, creating challenges and opportunities for individuals, communities, and businesses. Incremental improvements will not be enough. Investment will be needed in new technologies, infrastructure, and business models capable of delivering meaningful emissions reductions.

Artificial intelligence will not deliver those reductions by itself. Irish businesses also need the incentive and capacity to innovate and adopt the tools that can support change. This is where tax policy has a central role.

Ireland's tax strategy

KPMG’s Pre-Budget 2027 submission argues that Ireland should rethink its tax strategy while maintaining its competitive edge. In a period of global uncertainty, a stable and predictable policy framework that supports investment, innovation and employment is essential.

Ireland also has an opportunity to position itself as a global hub for innovation in digital transformation and green technologies. That opportunity is not only about attracting overseas investment. It is also about strengthening the domestic enterprise sector and enabling Irish businesses to adopt and develop technologies that will support future growth.

The green transition should be viewed through this lens. Businesses face immediate costs when they invest in equipment, redesign production processes, change energy sources, or adopt emerging technologies, while the benefits may arise over a longer period. In a challenging economic environment, that timing mismatch can make valuable investment difficult to justify.

Green Transition Tax Incentive

In its Pre-Budget 2027 submission, KPMG recommended the introduction of a Green Transition Tax Incentive to accelerate investment, alongside an increase in the research and development tax credit to 50% for green technology development.

Similar incentives have emerged elsewhere in Europe, principally because an expenditure-based tax incentive was one of two tax policies promoted in the EU Clean Industrial Deal, alongside accelerated depreciation.

A well-designed Green Transition Tax Incentive could encourage businesses to invest now in technologies and processes that reduce energy use and carbon emissions.

Although this year’s Budget did not include an expenditure-based incentive, our hope is that Government will seriously consider this option in future budgets.

In his Budget speech the Minister described the energy transition as “fundamental to our economic well-being; to our national security; to our competitiveness in an increasingly competitive world; and to our overall standard of living”.

The energy transition

The Government clearly recognises that the energy transition is critical to Ireland’s future success. Tax incentives have previously helped to deliver infrastructure, including toll roads and student accommodation, at a pace that would have been difficult for the Government to achieve alone.

In our view, a similarly focused approach should now be considered to accelerate the green transition, given the financial and social costs associated with climate change.

The Budget measures provide targeted support and adjust the timing of carbon tax increases. The next step should be a broader, predictable tax policy that helps businesses invest, innovate, and deliver the technologies and emissions reductions Ireland will need.