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Monday 4 December 2023 Dublin: 4°C

'They're taking 2c off us that they don't need': Drivers paying levy on petrol that is no longer needed, committee hears

The levy has been paid on petrol, oil and diesel since 1996.

DRIVERS AND HOMEOWNERS are paying more for their fuel due to the government collecting a levy which is no longer needed, an Oireachtas committee has heard.

The Oireachtas Public Accounts Committee heard yesterday the public has been paying a 2c levy on the cost of petrol, diesel and heating oil unnecessarily. 

The levy was introduced in 1996 to fund the National Oil Reserve Association (NORA). It was introduced due to the level of debt the agency had accumulated, of some €450 million. 

Oil companies are liable for payment of this levy when oil is placed on the market, but the levy is passed on to consumers when they purchase oil.

The levy is meant to be used to meet the running costs of the agency, but the legislation sets out that it should not exceed this.

The agency is responsible for holding 90 days of oil stocks for supply in an emergency. This oil stock is primarily held in Ireland, but under the rules, a percentage of the State’s oil reserves must be held in other EU States, in case of a national disaster. 

While the agency was in significant debt by the end of 2008, the Comptroller and Auditor General Seamus McCarthy said yesterday that the debt had been paid off in 2016. 

He said the option of removing or reducing the levy from all petrol, diesel and heating oil purchases is “something that could have been considered” by government at the time the debt was eliminated. 

‘Purpose has been met’

Fianna Fail TD Marc MacSharry accused the government of acting illegally by allowing the fund to accumulate, stating that the levy was introduced for a purpose, and that purpose has now been met. 

“Instead the government ploughed ahead” gathering money that was no longer needed, said McSharry. 

The money has built up in the fund, with the committee hearing that it could be in the region of €250 million.  

The C&AG confirmed that currently there is a prohibition on using the funds for on anything else other than the expenses of NORA. 

However, NORA’s 2018 accounts set out that the surplus has been retained, but arising from the government’s Climate Action Plan, plans are afoot to “re-purpose” the levy so it can be used as a “source of funding for a new Climate Action Fund”.  

If the money is to be repurposed, the C&AG confirmed that new legislation would need to be passed before the money could be touched. 

“That hasn’t happened,” he said. 

“My problem is, we are taking this carbon tax on the chin for climate change,” said McSharry, adding “they are taking 2c off us that they don’t need”. 

Speaking to after the meeting, McSharry said that reducing the levy now or scrapping it altogether “is a way to give back to the consumer”. 

A spokesperson for the Department of Communications, Climate Action and Environment said:

NORA is funded by a levy, currently set at a rate of 2 cent per litre on most petroleum products.
In 2009 the NORA levy was increased from 1 cent to 2 cents, in order to reduce debts that NORA had incurred in the purchase of oil stocks, in line with Government policy.  In 2017 this debt was cleared.
Given that NORA no longer requires a levy set at 2 cents per litre to fund its expenses, the Government decided that future excess funds, once the Agencies expenses have been met, could now be utilised to assist in the funding of climate action.

They did not specify whether the levy will be scrapped in the future, adding:

It is anticipated that the current levy rate of 2 cents per litre will be sufficient to both fund NORA’s expenses and provide at least €500 million for climate action over the lifetime of the Climate Action Fund.

It was reported over the summer that the government has been threatened with legal action over the move to repurpose the fund for climate action measures. 

However, Environment Minister Richard Bruton rejected criticism from the Irish Petroleum Industry Association (IPIA) in relation to the Climate Action Fund, saying that the €500 million is a crucial part of delivering the government’s action plan.

I cannot contemplate a situation where this money is handed back to industry, or that a new fund is created where industry could oversee or determine the types of projects to be supported. That is not a runner. 

The department spokesperson said legislation is currently being developed to allow the money collected through the levy be used for the Climate Action Fund.

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