Olivia Mitchell (Dublin South, Fine Gael)
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Question 168: To ask the Minister for Finance the Government's view on the potential for taxation to play a role in promoting energy efficiency and emissions reductions. [10209/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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As I have stated previously taxation, in conjunction with other policy measures, can play a part in attaining environment objectives which includes promoting energy efficiency and reducing emissions. Essentially this approach uses the tax system to provide incentives for certain behaviour.

Such incentives include capital allowances for corporate investment in renewable energy projects which have been available since 1998, and the significant Biofuels excise relief scheme which I provided for in Finance Act 2006. This latter Scheme will

provide for excise relief on up to 163 million litres of biofuels per annum;

cost over €200m over 5 years;

result in CO2 savings of over 250,000 tonnes per annum;

contribute towards meeting a target of 5.75% transport fuel market penetration by biofuels by 2009,

help reduce our dependency on conventional fossil fuels, and

stimulate activity in the agricultural sector.

As a complementary measure, I provided in Finance Act 2006 for a new 50% VRT relief to promote new flexible fuel vehicles (cars designed to operate on biofuels) for an initial period of 2 years, and also extended the existing VRT relief for hybrid cars by a further year to end 2007. I am also providing in Finance Bill 2007 for the introduction of a VRT relief of 50% for electric cars — cars which can be propelled by a rechargeable battery — on a pilot one year basis with effect from 1 January, 2007.

In addition I announced in the Budget the commencement of a public consultation process on adjusting VRT to take account of CO2 emissions of vehicles. A similar exercise is under way in the area of motor tax. Any changes will have effect from a target date of 1 January 2008.