Brian Cowen (Laois-Offaly, Fianna Fail)

The recent European Council set ambitious targets, in the context of climate change, for the reduction of CO2 emissions by 20% by 2020 for the European Community compared with the 1990 levels. The Council also endorsed a binding target of a 20% share of renewable energy in overall EU energy consumption by 2020 and a 10% binding minimum target to be achieved by all member states for the share of bio-fuels in overall EU transport petrol and diesel consumption by 2020, to be introduced in a cost-efficient way.

The Government recently published a White Paper entitled Delivering a Sustainable Energy Future for Ireland and a bioenergy action plan for Ireland. It is also preparing a new climate change strategy. In the White Paper, it has made clear that renewable energy will be a critical and growing component of Irish energy supply to 2020 and beyond. Renewable energy is an integral part of our climate change strategy and sustainability objectives. The additional diversity which renewables bring to Ireland's energy demand will also make a direct contribution to our goal of ensuring secure and reliable energy supplies.

The White Paper, and the bioenergy action plan, outline a range of measures to incentivise the development and deployment of renewable sources of energy. It sets very ambitious targets for expanding the role of renewable energy, most notably the target of 15% of electricity consumption to come from renewable resources by 2010 and 33% by 2020; a minimum target of 5% market penetration of renewables in the heat market by 2010 and 12% by 2020. The Government has also accepted the EU target of 5.75% bio-fuels market penetration by 2010 and at least 10% for 2020.

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While the promotion of renewable energy, including bio-fuels, is primarily a matter for my colleague, the Minister for Communications, Marine and Natural Resources, the taxation system, in conjunction with other policy measures, can play a part in attaining environmental objectives including the development and deployment of renewable sources of energy, including bio-fuels. In this regard the taxation measures which are already in place or are being introduced include a five year excise relief scheme for bio-fuels, costing over €200 million, which commenced in November 2006. The scheme provides for excise relief on up to 163 million litres of bio-fuels per annum; 50% vehicle registration tax relief for hybrid vehicles, flexible fuel vehicles and electric vehicles; extending the qualifying period from 31 December 2006 to 31 December 2011 for the scheme of corporate tax relief for corporate equity investments in certain renewable energy generation projects such as solar, wind, hydro or biomass technology categories, which have been approved by the Minister for Communications, Marine and Natural Resources; and extending to 31 December 2013 and enhancing the business expansion and seed capital schemes which can, among other manufacturing areas, be used for investment in companies engaged in renewable energy generation and recycling.

In addition, I announced in the budget the commencement of a public consultation process on adjusting VRT to take greater account of CO2 emissions of vehicles. My colleague, the Minister for the Environment, Heritage and Local Government, has undertaken a similar exercise. Any changes will have effect from a target date of 1 January 2008. My Department will also examine, in the context of the preparations for budget 2008, the case for disallowing, totally or in part, capital allowances and leasing expenses for high CO2 emission vehicles. Consultations will take place with the motor industry and the business sector as part of any review.

The overall level of excise relief available for bio-fuels under this scheme is that which the Minister for Communications, Marine and Natural Resources proposed in advance of budget 2006. It is regarded as a level which is sufficient to match Ireland's output potential for renewable energy crops for motor fuels over the coming years. These fiscal incentives were designed to kickstart the domestic bio-fuels industry and the evidence suggests that this is happening.

The Deputy might also wish to note there are additional non-fiscal measures that can be used to promote renewable energy, including bio-fuels, and reach the targets identified. In this regard to provide further market certainty and encourage projects of scale, the Government recently announced its intention to move to a bio-fuels obligation by 2009, with targets for market penetration for bio-fuels of 5.75% in 2009 and 10% by 2020.

The Government will examine other tax incentives or disincentives where these can be shown to have a clear cost-benefit in reducing CO2 emissions.

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