Written answers

Tuesday, 26 June 2007

10:00 pm

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 179: To ask the Tánaiste and Minister for Finance his proposals to tax incentivise bio-fuel production; and if he will make a statement on the matter. [17634/07]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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While the promotion of biofuel is primarily a matter for my colleague, the Minister for Communications, Energy and Natural Resources, I am pleased to inform the Deputy that in Finance Act 2006 I provided for significant tax measures to promote biofuels in Ireland. This scheme, which received the necessary EU State Aid approval, commenced in November 2006 and will:

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

cost over €200m over 5 years;

when fully operational, 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 50% VRT relief to promote new flexible fuel vehicles (cars designed to operate on biofuels) for an initial period of two years.

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

The Deputy might wish to note that there are additional non-fiscal measures that can be used to promote biofuels and reach the targets referred to. To provide further market certainty and encourage projects of scale, the Government recently announced its intention to move to a Biofuels Obligation by 2009, with targets for market penetration for biofuels of 5.75% in 2009 and 10% by 2020. The scheme is included in the Programme for Government in conjunction with a commitment to work with our EU partners to require biofuels used in transport to comply with an environmental certification system which incorporates sustainability criteria in terms of biofuel production.

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