Dáil Éireann Debate, Tuesday - 21 April 2026
287. Deputy William Aird asked the Tánaiste and Minister for Finance if he has assessed the potential knock-on effects of increased agricultural fuel costs on food price inflation, and the extent to which carbon taxation on agri fuels is contributing to increased costs for consumers; and if he will make a statement on the matter. [26863/26]
Amharc ar fhreagraFuels are, of course, an important input into the production, transportation and distribution of food, and any increase in fuel prices will potentially have some adverse impact on food prices. The actual impact will depend on the scale and duration of the energy price shock - the situation in the Middle East and the future path of commodity prices clearly remains highly uncertain.
My Department's spring economic forecasts as set out in the Annual Progress Report (APR) include a reference forecast for headline inflation where headline inflation averages 3.3 per cent while food inflation averages 2.7 per cent.
As well as the reference projection, adverse two alternative scenarios where there is a more pronounced and persistent disruption to energy supplies are detailed in the APR.
While energy is an input to food production, carbon tax increases on fuels used in agriculture are expected to have a very limited impact on overall inflation. Notwithstanding this, Government has agreed to delay the increase in carbon tax to later in the year.
In relation to agriculture specifically, farmers are eligible for a double income tax relief which compensates increases in the carbon tax from the 2012 base rate of €15 per tonne of CO2 emission. A farmer may take an income tax or corporation tax deduction for farm diesel (including any carbon tax charged in respect of the diesel) and then a further deduction for farm diesel which is equal to the difference between the carbon tax charged and the carbon tax that would have been charged had it been calculated at the rate of €41.30 per 1,000 litres of farm diesel (the 2012 baseline).
Agricultural contractors are not currently entitled to this relief as they are not carrying on a trade of farming as per the definition in section 654 of the Taxes Consolidation Act 1997 which requires the occupation of farmland and agricultural contracting does not involve the occupation of farmland. However, agricultural contractors who incur expenses in relation to farm diesel in the course of their trade of agricultural contracting may claim an income tax or corporation tax deduction for those expenses, including any carbon tax charged in respect of the diesel.
As the Deputy will be aware, Government announced a second package of measures on 12 April to address the current energy price inflation. This includes a further reduction on excise applying to MGO, bringing the overall reduction on MGO (inclusive of the NORA levy reduction ) to 7.4 cent per litre.
Furthermore, the Minister for Agriculture, Food and the Marine has announced comprehensive €100 million Fuel Subsidy Support Scheme to assist farmers, agricultural contractors and fishers facing unprecedented increases in fuel costs. The payments will cover the months of March up to the end of July which coincides with peak fuel usage on farms.
The scheme will provide €20 million per month in supports, with funding directly linked to fuel usage last year to ensure those most impacted by the fuel price increase receive the greatest assistance.
Farmers and agricultural contractors will benefit from a support rate equivalent to approximately 20 cents per litre of MGO (marked gas oil) used based on verified fuel consumption in 2025. The funding will be distributed proportionally, a point that was strongly emphasised in ongoing engagements with the representative farm and farm contractor groups.
Government has also established Farm Contracting Working Group Contractor Working Group, in line with a commitment in the Programme for Government.
This targeted and practical support package ensures that those most exposed to these increases will receive meaningful assistance at the most critical time of year.
