Niamh Smyth
Question:92. Deputy Niamh Smyth asked the Minister for Finance to review correspondence (details supplied); if he will outline if HVO falls under such rebate scheme; and if he will make a statement on the matter. [44015/23]
View answerTuesday, 10 October 2023
Questions (92)
Written answers
Ireland’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 that are used as motor or heating fuels.
MOT is comprised of a carbon component and a non-carbon component. The carbon component is referred to in legislation as the carbon charge, but it is more commonly referred to as the 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 it and the carbon tax are the two components of MOT, which is an excise duty.
The purpose of the Diesel Rebate Scheme (DRS) is to provide support to qualifying road haulage and passenger transport operators when the average retail price of diesel, inclusive of VAT, is at or above €1.23 per litre. The Scheme provides for a partial repayment of MOT to qualifying operators. The rate of repayment of MOT is capped at 7.5 cents per litre. The DRS is a State Aid which must operate in compliance with EU law.
MOT law defines a biofuel as being a fuel made from biomass, with biomass defined as the biodegradable fraction of products, waste and residues from agriculture (including vegetal and animal substances), forestry and related industries, as well as the biodegradable fraction of industrial and municipal waste. Section 100(5) of Finance Act 1999, which has been in place since 2012, provides that biofuels, such as Hydrotreated/Hydrogenated Vegetable Oil (HVO), are fully relieved from the carbon component of MOT.
The table below summarises current MOT rates applicable to biofuels used in place of auto-diesel, petrol and for non-propellant purposes such as heating. For comparison, it also details the MOT rates on auto-diesel, petrol and Marked Gas Oil.
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MOT rates per 1,000 litres effective from 1 September 2023 |
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Fuel type/use |
Non-carbon component |
Carbon component |
Total MOT |
|
Petrol |
€476.80 |
€112.23 |
€589.03 |
|
Biofuel used instead of petrol |
€476.80 |
Fully relieved |
€476.80 |
|
Auto-diesel |
€376.94 |
€129.81 |
€506.75 |
|
Biofuel used instead of auto-diesel |
€376.94 |
Fully relieved |
€376.94 |
|
Marked Gas Oil used for non-propellant (e.g. heating) purposes |
€17.62 |
€131.47 |
€149.09 |
|
Biofuel used for non-propellant (e.g. heating) purposes |
€17.62 |
Fully relieved |
€17.62 |
As the rates above indicate, biofuels such as HVO benefit from significantly lower MOT rates due to the carbon tax relief. HVO used in place of auto-diesel is relieved of the carbon tax which, inclusive of VAT, equates to a relief of 16 cents per litre. This tax treatment 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 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 tax take effect, the differential in tax costs between biofuels and fossil fuels will continue to widen, further incentivising the uptake of biofuels.