I am advised by my colleague, the Minister for Transport, that the Renewable Transport Fuel Obligation (RTFO) places a statutory obligation on suppliers of road transport fuel to ensure that a proportion of the fuels that are placed on the market in Ireland are produced from renewable sources and that renewable transport fuels adhere to sustainability and greenhouse gas emissions criteria. Economic operators within the obligation are awarded RTFO certificates for each megajoule (MJ) of renewable transport fuel placed of in the market or two RTFO certificates per MJ where it is produced from feedstock set out in Annex IX of the Renewable Energy Directive.
Following a statutory consultation process, the Minister for Transport made regulations under section 44G of the 2007 Act on 31 March 2023, which became operational on 1 April, aligned to the administrative requirements of the RTFO. The regulations authorise the National Oil Reserves Agency (NORA) to issue additional Renewable Transport Fuel Obligation (RTFO) certificates for specified renewable transport fuels, where those fuels are used for specific purposes or means of transport, to incentivise their supply. The renewable transport fuels specified include Hydrogenated vegetable oil (HVO), biomethane, green hydrogen, and renewable transport fuels used in aviation and maritime. It is envisaged that these regulations will be kept under review within the context of the development and implementation of the renewable transport fuel policy.
The 2023 RTFO rate is 17%. The rate of the obligation will increase on an indicative trajectory until 2030 and is subject to annual review and analysis. The Renewable Fuel for Transport Policy Statement sets out the annual increase in the Renewable Transport Fuel Obligation (RTFO) rate (provided for under Part 5A of the National Oil Reserves Agency Act 2007) to support the achievement of the Climate Action Plan E10/B20 target by 2030 and European obligations.
With regard to tax treatment of biofuel, 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. The ETD also allows Member States to apply partial or full reliefs or reduced rates of tax to biofuels produced from biomass. Biomass is defined as the biodegradable fraction of products, waste and residues from agriculture (including vegetable and animal substances), forestry and related industries, as well as the biodegradable fraction of industrial and municipal waste. The ETD provisions relating to fuels used for transport purposes are transposed into national law in Finance Act 1999. This law provides for the application of excise duty in the form of Mineral Oil Tax (MOT) to liquid fuels. It also provides for the application of MOT to gas used for propellant 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 excise. MOT law provides for a full relief from the carbon component of MOT for liquid or gaseous fuels that have been produced from biomass. This means that no carbon tax applies to biofuels, such as Hydrogenated/Hydrotreated Vegetable Oil or biomethane, used in any road vehicle, private or commercial. The table below lists the current MOT rates on petrol, auto-diesel and vehicle gas along with the effective MOT rates applicable to biofuels used in their place.
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Fuel Type
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Non-carbon component of MOT
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Carbon component of MOT
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Total MOT
(i.e. Non-carbon plus carbon)
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Effective MOT on biofuel (i.e. Non-carbon rate only)
|
|
Petrol (per 1,000 litres)
|
€419.89
|
€112.23
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€532.12
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€419.89
|
|
Auto-diesel (per 1,000 litres)
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€336.29
|
€129.81
|
€466.10
|
€336.29
|
|
Biogas (per megawatt hour)
|
€0.59
|
€8.77
|
€9.36
|
€0.59
|
Where a fuel blend contains biofuel, the carbon tax relief applies to the portion that is produced from biomass. Regarding hydrogen, its use in hydrogen fuel cells to power vehicles is outside the scope of MOT, i.e., such use is not subject to taxation.
The carbon tax relief for biofuels is intended to promote a higher level of biofuel usage and supports the Government’s commitment to incentivising more environmentally friendly alternatives to fossil fuels. As the carbon component of MOT is fully relieved for biofuels, these types of fuels are not impacted by the ten-year trajectory of carbon tax increases which was introduced in Finance Act 2020. This means that, as annual increases in the carbon component of MOT are implemented, the differential in tax costs between biofuels and fossil fuels will continue to widen, further incentivising the uptake of biofuels.
