The Government is examining whether it can cut VAT on energy bills as part of measures to offset soaring prices.

Cabinet sources told Extra.ie that it would require EU approval and warned that it would have a knock-on effect on the ability to fund new energy infrastructure projects.

One Cabinet source said: ‘There’s more flexibility on State aid and tax [from the EU side]. There’s a bigger toolbox in the mix now. There are more options, but there’s still a fiscal consequence.’

If the State covered the cost for the consumer, they would have to find a way to pay for the infrastructure without the tax paid by the consumer.

A raft of options on future energy supports will be provided to the Cabinet by the end of this month. This comes as the latest figures from Eurostat show that Ireland has the highest energy prices in the EU – almost 40% higher than the EU average.

This means that the average Irish household is paying around €480 a year more for electricity compared to the EU average.

The figures show Irish electricity prices jumped by 32.7% between July and December 2025, when compared with the same period in 2024.

Minister for Energy Darragh O’Brien updated the Cabinet on the work of the National Energy Affordability Taskforce when it met yesterday evening.

However, there were no details about potential measures in the memo. The taskforce will provide options on further short-term measures the Government can take to ease the burden on households caused by the soaring energy prices.

It is expected that consideration will be given to a further extension of the temporary cut in excise, with more substantive interventions coming in the Budget.

Mr O’Brien told Cabinet that fuel supplies in the country are robust and reliable but warned that costs are continuing to increase.

In the Dáil, Sinn Féin leader Mary Lou McDonald again called for an ‘emergency budget’, telling Taoiseach Micheál Martin that families are ‘under huge pressure’ due to the cost of groceries, fuel, insurance and energy bills.

She said: ‘People are sick of the Government standing back as they take hit after hit.’

Mr Martin said there was a need ‘to be careful’ as continued Government spending would have an ‘inflationary impact’.

He said the ‘other mechanisms’ would be available in the Budget to help people over the winter period, including tax measures.

Reporting by Craig Hughes and Muiris Ó Cearbhaill