Noel Coonan (Tipperary North, Fine Gael)
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Question 15: To ask the Minister for Agriculture, Fisheries and Food his views on the cost of the carbon tax for farms, which is estimated to be in the region of €225 for the average farm annually; and if he will make a statement on the matter. [40557/10]

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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The implementation of a carbon tax on fossil fuels is, in the first instance, a matter for my colleagues, the Minister for Finance and the Minister for the Environment, Heritage and Local Government. The Renewed Programme for Government contained a commitment to introduce a Carbon Tax in Budget 2010 and this commitment was fulfilled when a carbon tax at a rate of €15 per tonne on fossil fuels was introduced in the third Carbon Budget, delivered by the Minister for the Environment Heritage and Local Government, on 9 December 2009.

The tax applied to petrol and auto-diesel with effect from 10 December 2009 and from 1 May 2010 to Kerosene, Marked Gas Oil (also known as green diesel), Liquid Petroleum Gas (LPG), Fuel Oil and Natural Gas. In the case of the Agriculture Sector, the impact of the introduction of the carbon levy resulted in an approximate 8.7% increase in the price of Marked Gas Oil. The Minister for Finance has indicated that the estimated revenue arising from a carbon tax of €15 per tonne, on Marked Gas Oil used by farmers, is €12.5 million in a full year and being applied from 1 May, approximately €7 million in 2010.

The overall impacts on the Agriculture Sector of the Carbon Levy were calculated by Teagasc, based on National Farm Survey data. Whilst there is, of course, a considerable degree of variability across the various farm systems, the Teagasc analysis estimated that the average increase across all farms, including the impacts of the carbon levy on all fuel types, will be in the region of €230 per farm. It is important to stress that this figure of €230 per farm takes account of the increase on all fuel and lubricants that might be used by a farmer and is not confined solely to the green diesel used by farmers. It includes the increase in cost of the fuel consumed by agricultural contractors, hauliers, machinery hire and transport, or fuel used in other farm machinery owned by the farmer themselves, and also the fuel the farmers use in their private cars.

I am mindful that, as matters stand, a significant financial concession is afforded to the agriculture sector in the form of relief from excise duty on marked gas oil. Currently, excise duty on marked gas oil amounts to 4.7 cents per litre compared to an excise duty rate on auto-diesel, which, at 41 cents per litre, is almost ten times higher. It is also worth bearing in mind that since an excise duty on agricultural diesel was first introduced in 1988, at a rate of €47.36 per 1,000 litres, the rate has been increased, only for the first time, on foot of the introduction of this carbon tax. To help illustrate the significance of this concession; since 1988, the excise rates for petrol and auto-diesel have increased by around 40% and 45% respectively while agricultural diesel has remained unchanged.

When introducing the Carbon levy, Minister Gormley explained the principle of carbon pricing, noting that this mechanism is widely accepted as the most effective way to secure emission reductions. As the Deputy will, of course, be aware, each litre of gas oil, whether used in a tractor or in a diesel engine car, will generate the equivalent of almost 3 kilograms of Carbon dioxide. In 2008, Greenhouse gas emissions associated with agricultural combustion were in excess of 850,000, tonnes of CO2 equivalent. The aim of this carbon tax is to bring about a behavioural change that results in reduced consumption of fossil fuel and consequently, a reduction in emissions.

I am acutely aware that the imposition of this levy is not without consequence for farmers and for tillage farmers in particular. However, with greenhouse gas emissions from agriculture accounting for 29.1% of Ireland's emissions in 2009, I am also very conscious of the need to effect a reduction in these emission levels. As the figure of €230 per farm, established by Teagasc, assumes no change in fuel use by farmers, it should be possible to offset at least some of the increased costs associated with the introduction of the carbon tax, through better management of fossil fuel usage.