Explained: How will Budget 2020’s carbon tax hike impact on green diesel price?

Additional reporting by Claire Mc Cormack

Due to an increase in the carbon tax being applied to green (agricultural) diesel, the price of this fuel is set to rise next May, according to Revenue.

But how will it be applied – and how much will it cost?

Yesterday, Tuesday, October 8, the Minister for Finance, Public Expenditure and Reform, Paschal Donohoe, announced a €6/t increase in carbon tax – from €20/t to €26/t – on all fossil fuels.

However, the application of this carbon tax will be staggered over the course of the next seven months.

Tax breakdown

While the increase applied to Mineral Oil Tax (MOT) rates for mineral oils used as auto-fuels – for cars and trucks – from midnight last night, the Office of the Revenue Commissioners has confirmed that all other MOT rates – including those for green (agricultural) diesel – will remain at their current levels until May 1, 2020.

In a statement to AgriLand Revenue outlined the following:

“Green [agricultural] diesel – also referred to as Marked Gas Oil [MGO] – is subject to MOT which includes a carbon and a non-carbon component.

The current rate of MOT for Marked Gas Oil is €102.28 per 1,000L, comprised of a carbon charge component of €54.92 and a non-carbon charge component of €47.36 per 1,000L.

“These rates did not increase from budget night. From May 1, 2020, the MOT rate for marked gas oil will be €117.78 per 1,000L, arising from the increase of the carbon component from €54.92 to €70.42.

“The non-carbon component will not change from its current level of €47.36 per 1,000L.

“It is important to note that increases in MOT rates to come into effect from May 1, 2020, are subject to Dáil resolution,” the Revenue spokesperson concluded.

Consequently, the carbon component increase of €15.50 per 1,000L will result in an additional cost of 1.5c/L on green diesel as of next May.

While there is a double income tax relief from carbon tax available to farmers, according to the Department of Finance, agricultural contractors are believed not to be eligible for this relief.

This is further outlined in guidance notes pertaining to the Taxes Consolidation Act 1997 which states: “Farm diesel used by a farmer in the course of a farming trade is a deductible cost and, as carbon tax is included in the cost of that diesel, a farmer obtains a deduction for the amount of the carbon tax incurred on the purchase of farm diesel.”

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