Willie Penrose (Westmeath, Labour)
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Question 246: To ask the Minister for Finance if there is a policy reason, in relation to policy which he is pursuing which permits tax relief to be available on vehicles powered by electricity, dual fuel vehicles and those that can be powered by bio-ethanol fuels; his views on affording the same tax relief to vehicles that use bio-diesel; and if he will make a statement on the matter. [16141/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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In recognition of the need to tackle the issue of climate change and reduce our dependency on fossil fuels, this Government has introduced a number of tax reliefs aimed at promoting environmentally friendly vehicles, in addition to the promotion of alternative motor fuels. Firstly, a VRT relief for hybrid electric vehicles was introduced in January 2001. The purpose of the scheme — which provides for a 50% reduction in the VRT charge — is to encourage the purchase of vehicles that use a combination of an internal combustion engine and an electric motor to derive motive power. This hybrid electric technology results in significantly lower pollutant emissions than conventional vehicles powered exclusively by internal combustion engines.

In Budget 2006, I extend this 50% VRT relief to include flexible fuel vehicles. These are defined as cars or small vans produced so as to be capable of using a blend of ethanol and petrol containing a minimum of 85% ethanol. Inclusion of this category in the 50% VRT relief should encourage the purchase of vehicles that have been manufactured with flexible fuel capabilities which will result in lower pollutant emissions than conventional vehicles fuelled exclusively by petrol/diesel. The scheme does not extend to cars designed to run on high-grade biodiesel as this technology is at a very limited stage.

Aside from these initiatives aimed at promoting environmentally friendly vehicles, this Government has followed up a recent pilot scheme to promote Biofuels with, as announced in Budget 2006, a much larger-scale five-year €200m Excise Relief Scheme. The level of excise relief will start at €20 million in 2006 and will be increased to €35 million in 2007 and to €50 million in each of the following three years. This relief, when fully operational, is expected to support the use and production in Ireland of some 163 million litres of biofuels per year. This is 20 times the current level of biofuels that is excise-relieved under the pilot scheme and is expected to represent 2% of the transport fuels market by 2008. The Deputy may wish to note that this Scheme will of course cover the promotion of Biodiesel. Further details in respect of this Scheme will be announced by the Department of Communications, Marine and Natural Resources once the necessary EU State Aids approval has been granted; the application with the Commission is being progressed currently.