Dáil Éireann Debate, Tuesday - 29 September 2026
163. Deputy Barry Ward asked the Tánaiste and Minister for Finance his views on the merits of financially incentivising the use of HVO fuel instead of diesel to support achieving our climate emission targets, and in the context of significant price increases on fossil fuels. [68250/26]
View answerThe Mineral Oil Tax treatment of biofuels, including HVO, already financially incentivises biofuels over fossil fuels such as diesel. Under section 100(5) of Finance Act 1999 (as amended), biofuels which are produced from biomass qualify for relief from the carbon component of MOT (Carbon Tax), thus incentivising the uptake of more sustainable and renewable fuels. In the case of blended fuels, the biofuel relief applies to the biofuel portion. The effective MOT rates on biofuels, along with comparable MOT rates for fossil fuels, such as auto-diesel, 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.
The rate of the carbon tax relief for biofuels such as HVO used in place of auto diesel is currently c. 23 cents per litre on a VAT inclusive basis.
As biofuels are relieved of the carbon component of MOT, they are not impacted by annual carbon tax increases. As a result, the MOT rate differential between biofuels and fossil fuels will continue to widen as the 10-year carbon tax trajectory up to 2030 is implemented. I am advised by Revenue that in 2025 the tax forgone under the MOT biofuel relief is estimated at approximately €80 million. This estimate is based on an analysis of MOT returns data across all fuel types and a breakdown in respect of specific biofuels, such as HVO, is not available.
In line with the Programme for Government commitment to support decarbonisation of road freight and commercial coaches with fuels such as Hydrotreated Vegetable Oil (HVO), the tax treatment of HVO in the freight sector and possible further incentives for its use was examined in my Department’s Tax Strategy Group paper on Energy, Environmental and Vehicle Tax ahead of Budget 2026, which is available on my Department’s website at: www.gov.ie/en/department-of-finance/collections/budget-2026-tax-strategy-group-papers/.
This was again examined in the Tax Strategy Group paper on Energy, Environmental and Vehicle Tax paper ahead of Budget 2027, which is also available on my Department's website at: www.gov.ie/en/department-of-finance/collections/budget-2027-tax-strategy-group-papers/.
While tax levers can support policy measures, it is important to acknowledge that there is a limit to the role they can play in terms of price leverage. The price of HVO is dependent on many market factors.
These matters remain under review.
