Noel Grealish (Galway West, Independent)
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197. To ask the Minister for Finance if he plans to reform the current taxation amounts applying to the deployment of HVO and biofuel for HGVs; and if he will make a statement on the matter. [17512/24]

Michael McGrath (Cork South Central, Fianna Fail)
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Ireland’s taxation of fuel is governed by European Union law as set out in Directive 2003/96/EC, commonly known as the Energy Tax Directive (ETD). The ETD prescribes minimum tax rates for fuel with which all Member States must comply. ETD provisions on mineral oils are transposed into national law in Finance Act 1999 (as amended). Finance Act 1999 provides for the application of excise duty, in the form of Mineral Oil Tax (MOT), to liquid fuels that are used as motor or heating fuels. MOT comprises a carbon component, or carbon charge, which is usually referred to as carbon tax. MOT also comprises a non-carbon component which is often referred to as “excise” or “fuel excise/tax/duty”. It is important to note that both components of MOT are excise.

MOT law provides for differentiated MOT rates for fuels used for propellant and non-propellant purposes. Liquid fuels used for propellant purposes, such as for powering motor vehicles, are subject to standard rates of MOT. In general, under the ETD the same standard rate of tax must apply to a propellant fuel, regardless of the type of motor vehicle it is used in. This means that the same rate of MOT applies to a fuel whether it is used in heavy goods vehicles (HGVs), or in other types of motor vehicles. Fuels used for non-propellant purposes, such as heating, are subject to reduced MOT rates. MOT rates are published on the Revenue website at www.revenue.ie/en/tax-professionals/tdm/excise/excise-duty-rates/energy-excise-duty-rates.pdf.

Section 100(5) of Finance Act 1999 provides that all biofuels are fully relieved from the carbon component of MOT. This means that liquid biofuels, which are made from biomass, are subject to the MOT non-carbon component only and a carbon tax rate of zero applies. When biofuel is blended with fossil fuels, the relief from the carbon component applies to the biofuel portion of the blend. Hydrogenated/hydrotreated vegetable oil (HVO), or any other biofuel, used for propellant purposes attracts the standard MOT rate, minus the carbon component.

The table below summarises standard MOT rates per 1,000 litres for petrol and auto-diesel, effective from 1 April 2024. It also details the MOT rates applicable to biofuels used in place of petrol or auto-diesel.

As the rates above indicate, biofuels such as HVO, used in HGVs and in all other motor vehicles, benefit from significantly lower MOT rates due to the carbon tax relief.

As the Deputy will be aware, the Renewable Transport Fuel Obligation (RTFO) places a statutory obligation on suppliers of road transport (fossil) fuels to ensure that a proportion of the fuels they place on the market in Ireland is produced from renewable sources, i.e., complies with EU sustainability and GHG reduction criteria.

The Renewable Transport Fuel Policy 2023-2025 sets out an indicative trajectory of an annual increase to the RTFO rate to 2030, to meet both domestic decarbonisation targets and European renewable energy targets. Therefore, as the proportion on biofuel content increases, the proportion of relief from carbon tax also increases in light of the carbon tax relief applying to biofuel content.

In relation to HGVs, the Deputy will be aware that the Diesel Rebate Scheme (DRS) provides targeted support to qualifying road haulage and passenger transport operators. Under the DRS, qualifying operators may claim a partial repayment of MOT when the average retail price of auto-diesel, inclusive of VAT, is at or above €1.23 per litre. For road haulage operators, the auto-diesel must have been used in a road haulage vehicle with a maximum permissible gross laden weight of not less than 7.5 tonnes. HGVs fall within scope of qualifying vehicles for the DRS. The DRS is a State aid which operates in accordance with the EU General Block Exemption Regulation. Section 99A of Finance Act 1999 (as amended) provides for the DRS and sets out that to qualify for repayment auto-diesel must have been purchased tax-paid at the standard MOT rate. Where HVO is used as a direct substitute for auto-diesel the standard rate of MOT does not apply as the carbon component is fully relieved. Therefore, under MOT law, HVO used as a full substitute for auto-diesel does not qualify for the DRS. However, as set out above HVO used as a full substitute for auto-diesel is fully relieved from carbon tax and therefore benefits from a relief of approximately 15 cent per litre on a VAT exclusive basis while the maximum repayment rate for the DRS is 7.5 cent per litre.

In relation to VAT, motor fuels such as petrol, including bio-ethanol petrol blends, and auto-diesel are liable to VAT at the standard rate, currently 23%.

Finally, the Deputy should note that I currently have no plans to change existing arrangements.