Dáil Éireann Debate, Tuesday - 28 April 2026
429. Deputy Barry Ward asked the Tánaiste and Minister for Finance his views on the merits on financially incentivising the use of HVO fuel instead of diesel to support achieving our climate emission targets; and if he will make a statement on the matter. [30678/26]
Amharc ar fhreagra430. Deputy Barry Ward asked the Tánaiste and Minister for Finance his views on creating a regulation that would require parity between the price of HVO fuel and diesel fuel to support achieving our climate emission targets; and if he will make a statement on the matter. [30681/26]
Amharc ar fhreagraI propose to take Questions Nos. 429 and 430 together.
Regarding the broader policy perspective on the merits of incentivising biofuels such as HVO to reduce emissions, this is a matter for my colleague the Minister for Climate, Energy and Environment, while road transport emissions specifically is a matter for the Minister for Transport. In this regard I note that the Department of Transport has commissioned a study concerning the hierarchy of use of HVO across transport and other sectors, and when complete this research will be presented to the Alternative Fuels for Transport Working Group established by that Department.
With regard to tax treatment of HVO, liquid fuels, including biofuels such as hydrotreated/hydrogenated vegetable oil (HVO), are subject to Value-Added Tax (VAT), and to excise duty in the form of Mineral Oil Tax (MOT).
The VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law is obliged to comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate unless they fall within Annex III of the Directive, in respect of which Member States may apply a lower rate of VAT.
Motor fuels such as petrol, including bio-ethanol petrol blends, and auto-diesel are not included in the categories of goods and services on which the EU Directive allows a lower rate of VAT, and so they are liable to VAT at the standard rate, currently 23%. Biofuel and non-food vegetable oils, such as HVO, used to fuel vehicles are similarly liable to VAT at the standard rate and Ireland has no discretion in this regard.
Regarding MOT, biofuels which are produced from biomass qualify for relief from the carbon component of MOT under section 100(5) of Finance Act 1999 (as amended). This means that biofuels, such as HVO, bio-ethanol and Fatty Acid Methyl Ester (FAME), are only subject to the non-carbon component of MOT. In the case of blended fuels, the biofuel relief applies to the biofuel portion. I am advised by Revenue that current effective MOT rates on biofuels, along with comparable MOT rates for fossil fuels, such as auto-diesel, are published on Revenue’s website at : https://www.revenue.ie/en/companies-and-charities/excise-and-licences/mineral-oil-tax/liquid-substitute-fuels/index.aspx
For auto fuels, the current rate of carbon tax is €71 per tonne of CO2 emitted. For auto diesel this leads to a per litre charge of approximately 23 cent per litre on a VAT inclusive basis. As such HVO is currently receiving a significant relief which serves to incentivise the its uptake.
The tax treatment of HVO in the freight sector, and possible further incentives for its use, was examined in the Department’s most recent Tax Strategy Group paper on Energy, Environmental and Vehicle Tax, which is available on my Department’s website at: [https://www.gov.ie/en/department-of-finance/collections/budget-2026-tax-strategy-group-papers/]
