Willie Penrose (Westmeath, Labour)
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Question 124: To ask the Minister for Finance the level of financial incentives and aids available to people who are producing biofuel, in particular biodiesel, and with reference to correspondence (details supplied); if comprehensive details will be furnished; and if he will make a statement on the matter. [9617/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Policy in respect of the promotion or development of biofuels, including biodiesel, is primarily a matter for my colleague, the Minister for Communications, Marine and Natural Resources.

However, acknowledging that tax can play a role in the promotion of biofuels, a duty exemption scheme for pilot projects in biofuels was introduced by section 50 of the Finance Act 2004. The purpose of the provision was to allow qualified and conditional relief from excise for biofuel used in approved pilot projects for either the production of biofuel or the testing of the technical viability of biofuel for use as a motor fuel. It was necessary to obtain approval from the European Commission as the proposed scheme represented a State aid. Approval was granted in March 2005 and the scheme was subsequently advertised by the Department of Communications, Marine and Natural Resources. Excise relief was granted to eight successful applicants to the scheme from August 2005 for a total of 16 million litres of fuel.

The number of applications made for relief from excise duty under the pilot scheme clearly indicated the strong interest in developing a biofuels industry in Ireland and, consequently, I am making a provision in the Finance Bill 2006 for a significantly expanded five-year scheme of mineral oil tax relief to commence in 2006 and end in 2010. The scope of the relief will be extended to projects that are not just of a pilot nature.

Based on the biofuel market penetration targets of the Department of Communications, Marine and Natural Resources, the measure is estimated to cost €20 million in 2006, €35 million in 2007 and €50 million in each of the following three years. This relief scheme, when fully operational, is expected to support the use and production in Ireland of some 163 million litres of biofuels per year. Further details on how this scheme will operate will be produced by the Department of Communications, Marine and Natural Resources in the coming months once the necessary EU State aid approval has been obtained.