Verona Murphy (Wexford, Independent)
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169. To ask the Minister for Finance the proactive and immediate steps his Department is taking to address the excessive duty on HVO oil; and if he will make a statement on the matter. [62292/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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I understand that the Deputy is asking about the excise duty on hydrogenated vegetable oil used as motor or heating fuel.

The Finance Act 1999 provides for the application of an excise duty to specified mineral oils, such as petrol, diesel, and kerosene, that are used as motor or heating fuels; this excise duty is called Mineral Oil Tax (MOT) and comprises a carbon and a non-carbon component. Section 96(2A) of Finance Act 1999 provides that “substitute fuels” are also subject to MOT; substitute fuels are liquid products, other than mineral oils, that are used as motor or heating fuels. Under the Act, a substitute fuel is taxed at the MOT rate of the mineral oil in whose place it is used. For example, a substitute fuel used in place of diesel in a motor vehicle would be taxed at the MOT rate for auto-diesel, currently €535.46 per 1,000 litres, which comprises carbon and non-carbon components of €109.74 and €425.72 per 1,000 litres respectively.

MOT law provides for a relief from the carbon component of MOT for biofuels that are made of biomass of animal or vegetal origin. This means that a substitute fuel that is entirely made from biomass would be liable for the non-carbon component of MOT only. In the case of such a biofuel used in place of diesel, the MOT carbon component of €109.74 per 1,000 litres would be fully relieved and the applicable MOT rate would be €425.72 per 1,000 litres. For blended fuels containing biomass, the relief applies to the portion of fuel that meets the biofuel criteria set out in MOT legislation. The biofuel relief is intended to promote a higher level of biofuel in conventional transport fuel sales and supports Government’s commitment to incentivising the use of greener alternatives to fossil fuels.

Because the carbon component of MOT is already fully relieved for biofuels, these types of fuels are not impacted by the ten-year trajectory of carbon tax increases which I introduced in Finance Act 2020. This means that, as annual increases in the carbon component of MOT are implemented, the differential in tax costs between biofuels and fossil fuels will continue to widen, further incentivising the uptake of biofuels.

Finally, the Deputy may also wish to note that I introduced a Report Stage amendment to the Finance Bill 2021 so as to provide for a temporary reduction in the non-carbon component of MOT with effect from 1 April next year until Budget Day 2022. I have taken this step to partially offset the expected increase in fuel costs arising from an increase in the Biofuel Obligation for transport fuels proposed by my colleague the Minister for Transport. The reduction in MOT of 1 cent per litre (inclusive of VAT) will be matched by a reduction in the National Oil Reserves Agency levy, which together will offset the estimated impact of the biofuels increase on the retail price of auto fuels.