Dáil Éireann - Volume 678 - 12 March, 2009

Priority Questions. - Bio-fuel Industry.

Deputy Simon Coveney asked the Minister for Communications, Energy and Natural Resources if he is satisfied that the mineral oil tax relief scheme II is adequate to develop an indigenous bio-fuel industry; if it will stimulate investment in Irish bio-fuel plants; his views on changes to this scheme or if he is considering changes for the next phase of this scheme; and if he will make a statement on the matter. [10714/09]

  Deputy Seán Power: The bio-fuels mineral oil tax relief schemes resulted in 18 projects being awarded excise relief for the years 2005 to 2010. The schemes were designed as an interim measure to enhance the level of bio-fuels in the fuel mix and to encourage the development of an indigenous bio-fuels industry.

The Government’s bio-energy action plan, which was published in 2007, made clear that a national bio-fuels obligation would replace the relief schemes by the time those schemes came to a close at the end of 2010. Proposals are being finalised for the introduction of the obligation scheme next year. Another excise scheme will not be introduced.

Since the start of the relief schemes there has been a steady increase in bio-fuels used in Ireland, albeit from a very low base. Prior to the introduction of the schemes, market penetration of bio-fuels was almost non-existent. In 2007, the latest year for which figures are available, market penetration had risen to 0.6%. Continued increase in penetration is anticipated in the 2008 statistics.

At least five bio-fuels plants have been constructed or redeveloped on foot of excise relief granted under the scheme. A number of others are either at an advanced stage of planning, or have received planning permission.

It is the case that, generally, the European bio-fuels industry has experienced difficulties with a prolonged period of price volatility culminating in recent negative trends, which have seen the price of mineral diesel falling considerably. This has been exacerbated by rises in the price of feedstock for bio-fuels production. These two factors have caused severe competitive difficulties for the European and Irish bio-fuels sector. In addition, the availability of US subsidised bio-diesel, known as B99, has placed considerable commercial pressure on the European and Irish industries.

[57] In this overall context, progress on constructing all of the facilities benefiting under the mineral oil tax relief scheme has been inevitably slow, despite some early successes. The Department has been working closely with the Department of Enterprise, Trade and Employment to support official EU measures to counter the US export subsidy accorded to B99. A response from the EU Commission was made today, which I am sure will be well received both by European and Irish producers. Both EU action in the short term and the introduction of the bio-fuels obligation in 2010 should provide the Irish bio-fuels sector with the certainty it needs to invest and grow its business in a sustainable way.

  Deputy Simon Coveney: One of the problems of doing this on a Thursday afternoon, particularly this week, is that one gets the distinct impression that nobody is listening. Nonetheless, this is really important. Will the Minister of State inform the House how much money the State has lost in tax relief on imported fuel under this scheme since 2006? Can he provide an estimate? I expect it is well over €100 million.

The Minister of State said there were 18 successful applicants. Under the award scheme exercise, relief was applicable in the two big volume areas — 306 million litres of bioethanol and 290 million litres of bio-diesel. It would be very welcome if we were producing even a large proportion of that volume in Ireland. Of the 18 successful applicants, how many plants are being or have been constructed in the bioethanol and bio-diesel areas? My understanding is that there is only one.

  Deputy Seán Power: Between schemes one and two there are four projects in the bioethanol category.

  Deputy Simon Coveney: We are talking about scheme two here.

  Deputy Seán Power: I will have to check that, but between both schemes there were four projects.

  Deputy Simon Coveney: I am not referring to the pure plant oil.

  Deputy Seán Power: I will check and get a more specific answer to the Deputy’s question. I must point out, however, that the mineral oil tax relief schemes for bio-fuels were introduced under which 18 projects were awarded excise relief until 2010.

  Deputy Simon Coveney: On the specific——

  An Leas-Cheann Comhairle: Allow the Minister of State without interruption.

  Deputy Seán Power: There was always going to have to be imports. This is an interim measure, not a permanent solution. The US undercutting European and Irish companies made it difficult for the sector.

Today, the Commission announced its decision to impose an anti-dumping duty on US biodiesel. While the regulation in question is long and complex, the bottom line is that some importing companies will be hit harder than others. Our initial estimate is that the duty will be 16 cent per litre on average. We will be advising the industry about this change.

  Deputy Simon Coveney: I am trying to get at the fact that there are a relatively small number of companies which are importing large volumes of bio-diesel into Ireland to blend it with fuel that is sold at the pumps. I do not have a problem with the importation but I have an issue [58] with the State subsidising it. As a result, we are not seeing the development of a biodiesel industry in Ireland.

Have any of the companies successful under this scheme built or intend to build bio-fuel production plants in Ireland? Does the Government plan to re-evaluate the project so as to encourage an Irish industry rather than subsiding imported biodiesel which is not environmentally friendly as it has to be transported across the Atlantic?

  Deputy Seán Power: Plants have been built in Ireland. At European level, we have set a 10% target of renewable energy in transport by 2020. Bio-fuels will make a significant contribution to the achievement of that target. It will be reviewed on an ongoing basis as more evidence comes to light of the effects of bio-fuels on world food markets and as new technologies come on stream.

This relief scheme was very much an interim measure. The bio-fuels obligation is the key and will be put in place through legislation next year.

  Deputy Simon Coveney: How much of that fuel will be produced in Ireland? It makes no economic sense to import bio-fuels.

  An Leas-Cheann Comhairle: The Deputy has made his point.

  Deputy Seán Power: It is imperative the bio-fuels in Ireland are compliant with the EU sustainability criteria which will be used as the basis when drafting the legislation.

  Deputy Liz McManus: No one is listening.