The Cabinet has today (Wednesday, April 13) signed off on an agreement to “fully offset” an increase in carbon tax which would result in extra costs for the use of agri-diesel, Agriland understands.

An increase in carbon tax from May 1, 2022 would have resulted in extra expense for those who use agri-fuel, particularly contractors.

In an effort to ease the burden of rising costs faced by those in the agriculture sector, the government has agreed a further corresponding reduction in fuel excise duty to “offset” the carbon tax increase, to the value of 2.7c/L.

Minister of State at the Department of Agriculture, Martin Heydon has welcomed the move.

He told Agriland: “We are entering a very important period on farms with the silage season fast approaching. Farmers and contractors are currently enduring a period of significantly increased input costs. 

“Government recognises this and has moved to fully offset the cost of additional carbon charges on green diesel from May 1.”

Minister for Finance, Paschal Donohoe added: “The government is acutely aware of the impact that rising prices are having on citizens and businesses right across the country. That is why we have responded with a series of measures over recent months at a cost of close to €2 billion.

“Today, the government has agreed to reductions in the rate of VAT from 13.5% to 9% on the supply of gas and electricity for a temporary period from May 1 until October 31, costing an estimated €46 million.

“This will result in savings of €50 on an annual gas bill and €70 on an annual electricity bill.

“A further reduction in excise duty on Marked Gas Oil by 2.7c and an extension to the period at which the reduced excise on petrol, diesel and marked gas oil applies to Budget Day will benefit all households, businesses and our farming sector,” the finance minister added.

Excise on agri-diesel

Last month, the cabinet signed off on a cut in excise duty on fuel which saw a 2c/L reduction in the price of agricultural ‘green’ diesel, at a cost of €10 million.

Farm organisations described the impact of the cut on excise duty to green diesel prices as being very muted at the time, compared to the impact on petrol and ‘white’ diesel.

Some TDs had also been calling for the carbon tax to be scrapped or suspended due to rocketing fuel prices.

The Rural Independent Group of TDs said previously that the current energy cost inflation and energy taxes “are making heating a home, running a car, or operating a farm, transport or small business completely unaffordable”.

VAT reduction on energy

Meanwhile, the Cabinet has also signed off on a value added tax (VAT) reduction for energy bills, effective from May 1.

The VAT rate will be reduced from 13.5% to 9% on a short-term basis until October 2022.

As part of the government’s National Energy Security Framework measures announced today, there will be a continuation of the excise duty reduction on petrol, diesel and marked gas oil until the Budget in October 2022.

The measures also include the further 2.7c/L excise reduction on agri-diesel.

There will also be a new targeted €20 million scheme for the installation of photovoltaic (PV) panels for households that have a high reliance on electricity for medical reasons.

There will also be an additional payment of €100 for all recipients of the Fuel Allowance.

Environment minister, Eamon Ryan said: “The energy price increases that we have experienced are related to fossil fuels primarily.

“This framework is pointing us away from fossil fuels and towards greater levels of indigenous renewable energy. It also provides details on progressive measures that government has already put in place to support households and businesses, like the ambitious retrofitting scheme.

“We want to ensure that homes across the country are warmer, healthier and cheaper, starting with generous grants for attic and cavity wall insulation which can benefit between 500,000 and 700,000 households immediately.”