Dáil Éireann debate -
Tuesday, 25 Feb 2003

Vol. 562 No. 1

Written Answers - Motor Fuels.

Trevor Sargent

Question:

274 Mr. Sargent asked the Minister for Finance if his attention has been drawn to the fact that the increase in diesel prices following the budget has knocked back the potential of biodiesel to help in developing cleaner fuel than mineral diesel and towards import substitution; and if he will consider a reduction in the tax rate for biofuels as introduced in the UK or waiving this excise duty altogether. [5167/03]

Minister for Finance (Mr. McCreevy)

The excise rate for auto-diesel prior to budget 2003 was well below the EU average, the Irish rate was 30c per litre compared with the EU average of 35c per litre. Even after this increase, the Irish rate will only rank 7th in the EU, at 33c per litre. Moreover, the price of diesel had in fact decreased in real terms by 14% between 1993 and 2002, while the tax content had decreased by 17.3% in real terms, pre-budget.

At present, under European Union law, the rate applicable to substitute fuel is the same as that applicable to auto-diesel. Substitute fuels are products such as biofuels that are manufactured, produced, and intended for use or used as motor fuel. There are proposals relating to energy taxation currently at an advanced stage of discussion in the EU Council. One of the provisions in the proposal would allow member states to grant relief or exemptions from excise duty on biofuels – assuming final agreement on the proposals. Such relief or exemption would be discretionary on the part of member states.

For the Deputy's information, the matter of biofuel production falls within the remit of the Department of Transport. The Department has informed my Department that Sustainable Energy Ireland has commissioned a paper from Teagasc on the current position regarding liquid biofuels in Ireland. The paper, due shortly, will lay out strategic options for the sector. The Department of Transport will review the paper in the context of implementing the forthcoming EU directive on the promotion of the use of biofuels. They intend to develop a strategy that takes account of the different interests involved. Pending the outcome of this paper, and consideration of same by the responsible Department, it would be premature to examine the issue of excise duty relief for biofuels.

I am aware that the United Kingdom sought and were granted a derogation under Article 8(4) of Directive 92/81/EEC in respect of biodiesel from the Council of Ministers. This derogation authorised the UK to reduce the rate of excise duty for biodiesel from 74c per litre to 41.4c per litre, which is still higher than the Irish rate of 33c per litre. This derogation is to have effect from spring 2002 for a five year period until 2007.

Trevor Sargent

Question:

275 Mr. Sargent asked the Minister for Finance if he will report on the progress to introduce a carbon tax and the corresponding reduction in income tax and measures to avoid fuel poverty and ensure equity. [5168/03]

Minister for Finance (Mr. McCreevy)

In my Budget Statement of 4 December 2002, I indicated that we have international obligations under the Kyoto Protocol to reduce greenhouse gas emissions. For this reason, the Government has asked the relevant Departments to advance the plans for a general carbon energy tax, with a view to introducing this from the end of 2004. Given the many implications of such a tax, both environmental and economic, there will be full consultations with interested parties on the design of the tax and a reasonable period is being allowed for its effective introduction. All relevant issues, including those relating to revenue recycling and fuel poverty, will be taken into account in this consideration.