Peadar Tóibín (Meath West, Aontú)
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306. To ask the Minister for Finance the exemptions to carbon tax in place for products that are designed specifically to reduce carbon emissions, including consumer products; and how exemptions for these can be sought. [57144/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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Ireland’s carbon tax regime is a carbon pricing mechanism directly linking taxation of fossil fuels to carbon dioxide (CO2) emissions: a price is set for a tonne of CO2 and this price is then applied to each fuel type according to the fuel type’s specific CO2 emissions. Carbon taxes are applied under three separate legislative frameworks - Mineral Oil Tax (MOT), Natural Gas Carbon Tax (NGCT), and Solid Fuel Carbon Tax (SFCT). NGCT and SFCT are “pure” carbon taxes whereas MOT comprises a non-carbon and a carbon component. Legislation was introduced in 2020 to provide for a ten-year trajectory of carbon tax increases. Under this trajectory, by 2030 all carbon tax rates will be based on charging €100 per tonne of CO2. Information on MOT, NGCT, and SFCT rates is available on Revenue’s website: at www.revenue.ie/en/tax-professionals/tdm/excise/excise-duty-rates/energy-excise-duty-rates.pdf.

MOT, NGCT and SFCT law provide for several full and partial carbon tax reliefs for fuels used for specific purposes. Some of these reliefs, such as those for fuels used for producing electricity, are mandatory under EU law. Others, such as those applying to certain fuels used for horticultural production and mushroom cultivation, were introduced in national legislation to provide sector-specific support. Carbon tax reliefs for fuel uses aimed specifically at reducing carbon emissions include MOT, NGCT and SFCT reliefs for fuels used to produce electricity in High Efficiency Combined Heat and Power cogeneration (HECHP) installations. These reliefs incentivise advanced technologies which achieve higher energy efficiencies and reduce fuel consumption. I am advised by Revenue that HECHP operators may, subject to certification of fuel usage by the Commission for Regulation of Utilities, claim relief by way of repayment. Full details are available on Revenue’s website at: www.revenue.ie/en/companies-and-charities/excise-and-licences/energy-taxes/he-chp/index.aspx.

The tax treatment of biofuels and biogas also aims to reduce carbon emissions by incentivising their usage over fossil fuels. Biogas used for non-propellant purposes (e.g. heating) is outside the scope of carbon taxation, and biogas for propellant (e.g. motoring) purposes is fully relieved from the MOT carbon component. Liquid biofuels are also fully relieved from the MOT carbon component of MOT and are subject only to the MOT non-carbon component. I am advised by Revenue that current effective MOT rates on biofuels, along with comparable rates for fossil fuels, are published on Revenue’s website at: www.revenue.ie/en/companies-and-charities/excise-and-licences/mineral-oil-tax/liquid-substitute-fuels/index.aspx.

SFCT law also provides for reliefs intended to incentivise more environmentally friendly alternatives to fossil fuels. Manufactured solid fuel products with a biomass content of 30% or more, qualify for partial relief from SFCT. Further information is available on Revenue’s website at: www.revenue.ie/en/companies-and-charities/excise-and-licences/energy-taxes/solid-fuel-carbon-tax/reliefs.aspx. I am advised by Revenue that SFCT biomass reliefs, and MOT reliefs for biofuels and biogas, operate by way of remission with suppliers declaring volumes of fuel relieved on relevant tax returns.

As biofuels, biogas, and the biomass content of solid fuels are relieved from, or outside the scope of, carbon taxation, they are insulated from annual carbon tax increases. As a result, the tax rate differential between these energy products and fossil fuels will continue to widen as the 10-year carbon tax trajectory is implemented.