Dáil Éireann Debate, Tuesday - 24 January 2023
105. Deputy Christopher O'Sullivan asked the Minister for Finance if consideration will be given to reducing the excise duty on hydrotreated vegetable oil, in recognition of its use as a very low-emission fuel; and if he will make a statement on the matter. [3025/23]
View answerIreland’s taxation of fuel is governed by European Union law as set out in Directive 2003/96/EC, commonly known as the Energy Tax Directive (ETD). The ETD prescribes minimum tax rates for fuel with which all Member States must comply. ETD provisions on mineral oils are transposed into national law in Finance Act 1999 (as amended). Finance Act 1999 provides for the application of excise duty in the form of Mineral Oil Tax (MOT) to liquid fuels used for motor or heating purposes.
MOT is comprised of a non-carbon component and a carbon component with the carbon component being commonly referred to as carbon tax. The non-carbon component of MOT is often referred to as “excise”, “fuel excise”, “fuel tax” or “fuel duty” but it is important to note that both components are part of MOT which is an excise duty. Carbon tax rates are based on charging an amount per tonne of carbon dioxide emitted on combustion of the fuel concerned. Fuels with lower carbon dioxide emissions attract lower rates of carbon tax than fuels with relatively higher emissions.
As has been outlined in response to questions in recent weeks about biofuels such as Hydrogenated/Hydrotreated Vegetable Oil (HVO), the State’s MOT law - as governed by the ETD - relieves biofuels from the carbon component of MOT. This relief is provided for in section 100(5) of Finance Act 1999 which has been in place since 2012. Where a fuel meets the criteria of being produced entirely from biomass no carbon taxation currently applies.
MOT law specifies rates of taxation for certain fuels and uses. Standard rates apply to fuels used for propellant purposes including in road vehicles. Reduced rates apply to fuels used for all other purposes, such as heating. Full details on current MOT rates are published on the Revenue website at:
www.revenue.ie/en/tax-professionals/tdm/excise/excise-duty-rates/energy-excise-duty-rates.pdf
Where a liquid that is not specified in MOT law is used as a motor or heating fuel, “substitute fuel” rates apply. These are summarised in the table below, along with the effective rates applicable to biofuels that qualify for carbon tax relief.
|
Substitute fuel use |
Excise Rate per 1,000 litres of Substitute Fuel |
|||
|
Non-Carbon component of MOT |
Carbon component of MOT |
Total MOT(i.e. Non-Carbon plus Carbon) |
Effective MOT if biofuel (i.e. Non-Carbon rate only) |
|
|
Instead of petrol |
€371.11 |
€112.23 |
€483.34 |
€371.11 |
|
Instead of auto-diesel |
€295.64 |
€129.81 |
€425.45 |
€295.64 |
|
Non-propellant purposes such as heating |
€00.00 |
€111.14 |
€111.14 |
€00.00 |
As the rates above indicate, biofuels such as HVO benefit from significantly lower MOT rates due to the carbon tax relief.
The MOT relief from carbon taxation for biofuels reflects a clear policy to incentivise the use of such fuels. As the ten-year trajectory of carbon tax increases introduced in Finance Act 2020 is implemented, the tax differential between biofuels and fossil fuels will continue to widen, further incentivising the uptake of biofuels.
