Energy price shock hits low-income households hardest

Recent energy price increases are placing a disproportionate burden on low-income households, with government supports only partly offsetting the impact. New research from the Economic and Social Research Institute (ESRI) shows that rising energy prices in 2026 are highly regressive, affecting low-income households relatively more than high-income households. The study also shows that recent government measures have reduced — but not eliminated — the cost pressures facing households.

The research uses the ESRI’s tax-benefit model, SWITCH, to examine how the latest surge in energy prices affects households across the income distribution. It finds that lower-income households spend a larger proportion of their income on energy, particularly on home heating and motor fuels. As a result, increases in fuel and heating costs place a heavier financial burden on low-income households. Without the government’s cost-of-living package, low-income households would face an energy price increase equivalent to 3% of their household income. High-income households would face an energy price increase of 1%.

The research estimates the effect of the two packages of measures introduced by government in March and April 2026 on household incomes. The measures considered include the reduction in excise duties on fuel, the suspension of the NORA levy¹, the extension of the Fuel Allowance season and the deferral of planned carbon tax increases. The analysis finds that these measures reduce the immediate cost increases by approximately half, but do not fully offset the regressive nature of energy inflation. Crucially, much of the benefit of these measures comes from broad-based tax reductions, which apply to all households regardless of need.

Dr Claire Keane, Associate Research Professor at the ESRI, said:

“Energy price increases have a clear regressive impact, placing a greater burden on low-income households. While recent policy measures help to cushion the shock, their largely untargeted nature means that a significant share of the support goes to higher-income households. More targeted measures could better protect vulnerable groups at a lower cost.”

“Ongoing energy price volatility and potential future fines for failing to meet EU greenhouse gas emission targets highlight the reliance on fossil fuels in Ireland and the need to reduce such a reliance,” she added.

1. The National Oil Reserves Agency (NORA) Levy, in place since 2007, is a levy on petroleum products, in place to fund Ireland’s strategic oil reserves.