Jennifer Carroll MacNeill (Dún Laoghaire, Fine Gael) | Oireachtas source

Senators will be aware the Government is committed to tackling climate change and decarbonising the economy by 2050, and we are very much aware of the challenges subsidies pose to our collective effort to disincentivise fossil fuels. We are stuck in a difficult transition period as we try both to help people meet their energy bills and to transition the economy to renewable energy sources.

The programme for Government, the climate action plan and the Climate Action and Low Carbon Development Act form broad policy and legislative frameworks for moving away from fossil fuels to renewable energy and alternative fuels and technology. Carbon tax is an especially important part of that and those who are committed to climate change mitigation would, of course, support that. It is nonetheless recognised it is a transition for households and businesses in this country and we have yet to build many of the renewable opportunities that are in front of us. In my constituency, a renewable project could cheaply and cleanly power up to 700,000 homes in Dublin, and it is these sorts of projects that require support and activation.

Ireland's excise duty, more specifically on the treatment of fuel used for air navigation, is governed by the European Union law as set out in Directive 2003/96/EC on the taxation of energy products and electricity, commonly known as the energy tax directive, ETD. The provisions of the current energy tax directive relating to aviation fuels were transposed into Irish law in the Finance Act 1999, as amended, which provides for the application of excise duty in the form of mineral oil tax on liquid fuels used for motor and heating purposes. Heavy oil is the most commonly used fuel type in commercial air navigation and the ETD currently obliges all member states to exempt heavy oil for intracommunity and international air transport purposes. A member state may waive this exemption for intracommunity flights where it has entered into a bilateral agreement with another member state to tax fuel, but no such agreements are in place in the EU at present.

In addition, Senators will be aware that in July 2021, as part of the Fit for 55 package, the European Commission published a proposal to revise the energy tax directive and that taxation of intracommunity forms part of the proposal to date. This has proved to be one of the more contentious aspects of the file because of the wish of certain member states to maintain the exemption on the taxation of excise fuel.

Given that no bilateral agreements are in place and that the energy tax directive is currently subject to renegotiation, with the taxation of aviation fuel on the agenda, the Minister for Finance does not see any potential for bilateral agreements to tax fuel for intracommunity flights at present. Instead, he believes a collaborative EU-wide approach is the most effective way of addressing this issue. Accordingly, Ireland will continue to engage with the Commission and member states to reach a well-balanced and effective compromise on the proposal.

Separately, as Minister of State with responsibility for financial services, I note the aircraft leasing industry in this jurisdiction, which leases more than half of the world's aeroplanes, has a strong interest in developing the renewable opportunity here and developing sustainable aviation fuel from this jurisdiction, with an important parallel opportunity for the State in the development of that economy. I cannot accept the recommendation, for the reasons I outlined relating to the EU.