Dáil Éireann Debate, Wednesday - 17 April 2024
23. Deputy Colm Burke asked the Minister for Finance if consideration would be given to reclassifying hydrotreated vegetable oil as a home heating fuel, in view that it is currently rated as a transport fuel and is therefore more expensive to purchase than diesel and kerosene; and if he will make a statement on the matter. [17018/24]
View answerAs the Deputy will be aware, while taxation contributes to the final retail cost of fuels, there are a number of factors affecting the final retail price including international energy market dynamics, exchange rate fluctuations, wholesale contracts, transport costs and individual retail pricing policy.
Excise law provides that the excise duty rate which applies to a fuel depends on the use to which it is put, as well as the particular type of fuel involved. Higher excise rates apply to a fuel when it is used for propelling a motor vehicle than when it is used for non-propellant purposes such as heating. Also, under the law biofuels (such as HVO) are subject to lower rates of excise than the rates applicable to fossil fuels such as diesel and petrol. Of course, excise, and indeed Value-Added Tax (VAT), only partially contribute to the retail price of any fuel; the price is also affected by the cost of producing the fuel and getting it to market, and this can vary considerably between different fuel types.
Finance Act 1999 provides for an excise duty in the form of Mineral Oil Tax (MOT) to apply to liquid fuels used for motor or heating purposes. 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.
As previously outlined to the Deputy, in response to question 334 on 18 January 2023, 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. Fuels used for other purposes, such as heating, are subject to reduced MOT rates. Under MOT law, fuels used for heating, including hydrogenated/hydrotreated vegetable oil (HVO), are not treated as transport fuels, nor are they subject to the significantly higher standard rates of MOT that apply to transport fuels. 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.
In addition to the reduced MOT rate applicable to heating fuels, 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. Where hydrogenated/hydrotreated vegetable oil (HVO), or any other biofuel, is used for heating or other non-propellant purposes, it attracts the MOT rate for marked gas oil, minus the carbon component. The table below summarises current propellant and non-propellant MOT rates for petrol, diesel, kerosene and biofuels.
MOT rates per 1,000 litres effective from 1 April 2024
|
Fuel type/use |
Non-carbon component |
Carbon component |
Total MOT |
|
Petrol |
€509.32 |
€129.59 |
€638.91 |
|
Biofuel substituted for petrol |
€509.32 |
€0.00 |
€509.32 |
|
Auto-diesel/propellant kerosene |
€401.33 |
€149.89 |
€551.22 |
|
Biofuel substituted for auto-diesel/propellant kerosene |
€401.33 |
€0.00 |
€401.33 |
|
Marked Gas Oil used for non-propellant purposes |
€32.49 |
€131.47 |
€163.96 |
|
Kerosene used for non-propellant purposes |
€0.00 |
€122.83 |
€122.83 |
|
Biofuel used for non-propellant purposes |
€32.49 |
€0.00 |
€32.49 |
As the rates above indicate, biofuels such as HVO that are used for heating benefit from significantly lower MOT rates than those on transport fuels - €32.49 per 1,000 litres for HVO used for heating, compared to €551.22 per 1,000 litres for auto-diesel. The carbon tax relief is intended to promote a higher level of biofuel usage and supports the Government’s commitment to incentivising more environmentally friendly alternatives to fossil fuels. As biofuels are not subject to carbon taxation, they are not impacted by the ten-year carbon tax trajectory introduced in Finance Act 2020. As carbon tax rates increase annually, the MOT rate differential between biofuels and fossil fuels will continue to widen, further incentivising biofuel uptake.
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%. HVO used as heating fuel is liable for the reduced VAT rate of 13.5%, which again is a more favourable tax treatment than that applicable to transport fuels.
