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Money from drivers paying 2c levy on petrol will soon be used for government climate action plans

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

Drivers have been paying the levy since 1996, with the money being used to fund the agency NORA and service its debts.
Drivers have been paying the levy since 1996, with the money being used to fund the agency NORA and service its debts.
Image: Shutterstock/Minerva Studio

MONEY FROM A levy which is paid by the oil industry but passed on to the consumer when they purchase petrol, diesel and heating oil will soon be used for the Climate Action Fund. 

The levy is currently set at a rate of 2c per litre on most petroleum products.

It 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, with current legislation setting out that it should not exceed this.

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

The C&AG has confirmed that that a prohibition on using the funds on anything else other than the expenses of NORA has been in place since the 90s.

Re-purposing the money

However, yesterday Cabinet approved new legislation which will allow the money to be repurposed.

While the levy was brought in to address the agency’s significant debt, the Comptroller and Auditor General Seamus McCarthy said recently 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. 

Instead of removing the levy, the government said yesterday the excess levy income that is not required for the operation of NORA will be invested into the new Climate Action Fund.

The money collected by the levy will now go to support projects to reduce Ireland’s greenhouse gas emissions.

Projects that will benefit for funding include ESB eCars, as well as hybrid inner city railcar fleet investment.

Yesterday, the government approved the priority drafting of the National Oil Reserves Agency (Amendment) and Provision of Central Treasury Services Bill, which will ensure the levy, going forward, will be directed to the Climate Action Fund. 

NORA’s operations

It is understood that the fund, which is already above the threshold it should be under the current legislation, cannot be used for the fund, but instead must be used to fund NORA’s operation in the years to come.

The government said the Climate Action Fund will be established on a statutory basis, adding that transparent reporting on how this money is being invested and the impact it is having on carbon abatement will be vital. 

While the government believes repurposing the fund for climate action initiatives is the right move, others such as Fianna Fáil’s Marc MacSharry argue that as the levy was introduced to pay a debt. The debt has now been paid, therefore the extra levy should be scrapped. 

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

He added that reducing the levy now or scrapping it altogether “is a way to give back to the consumer”.   

MacSharry says the levy should be reduced and the industry forced to pass it on to consumer.   

“Discriminatory double taxation of rural and regional ireland to fund climate change. We are all committed to climate change and the need to fund measures but that’s what carbon tax is for. 

“€90m extra will in carbon tax increase in 2020 and more than €3bn since it was introduced in 2010. The legitimate question can be asked have the government been using the resources wisely. No is the answer.  Carbon tax a fact if life and here to stay.

“Rural and regional ireland will play there part but what Fine Gael are doing amounts to total discrimination based on the lack of availability of alternatives to fossil fuels and car dependency with less rural transport,” he said.

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