Bernard Durkan (Kildare North, Fine Gael)
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Question 152: To ask the Minister for Finance if he proposes further incentives to encourage bio-fuel production; and if he will make a statement on the matter. [19285/09]

Brian Lenihan Jnr (Dublin West, 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, the Deputy will be aware the Finance Act 2006 provided for significant tax measures to promote biofuels in Ireland. Under the scheme, biofuel produced under projects approved by the Department of Communications, Energy and Natural Resources are exempt from excise duty. This serves to reduce the additional costs associated with the production of biofuels and consequently allows them to compete with conventional fossil fuels. This fiscal incentive was designed to kickstart the domestic biofuels industry. Long-term general excise reliefs are not anticipated.

In addition, as a complementary measure, the Finance Act 2008 provided for the VAT rate applicable on the supply of miscanthus rhizomes, seeds, bulbs, roots and similar goods used for the agricultural production of bio-fuels to be reduced from 21% to 13.5%. Furthermore, Budget 2007 provided funding for a national top-up of the EU energy crop payment from €45 per hectare to €80 per hectare. This payment is operated by the Department of Agriculture, Fisheries and Food and provides farmers with a further incentive to grow energy crops.

The Deputy might wish to note that there are additional non-fiscal measures that can be used to promote biofuels. To provide further market certainty and encourage projects of scale, the Government signalled its intention to move to a Biofuels Obligation. I understand from my colleague, the Minister for Communications, Energy and Natural Resources that the introduction of the Biofuels Obligation will require all fuel suppliers to ensure that biofuels represent a certain percentage of their annual fuel sales. The biofuels obligation is designed to provide a long-term market based framework for the development of a biofuels sector and delivery of biofuels targets to 2020. Under the Biofuels Obligation Scheme, suppliers will be compelled to use biofuel in the fuel mix providing a valuable boost to the biofuels industry generally.

The public consultation process in relation to the Biofuels Obligation Scheme was completed at the end of November last and there were 40 submissions received as part of the consultation process. Specific details for a final Biofuels Obligation Scheme are now being prepared which are cognisant of the views expressed by stakeholders following the consultation process. The Minister for Communications, Energy and Natural Resources will be bringing a proposal to Government shortly and introduce the necessary legislation required in order that the Biofuels Obligation Scheme can be introduced in January 2010.