202. Deputy Erin McGreehan asked the Minister for Finance whether tax incentives or accelerated capital allowances are being considered for companies investing in biomethane production or grid injection facilities. [60671/25]

As the Deputy will be aware, biomethane production is still at an early stage of development in Ireland, with only two operational biomethane facilities injecting biomethane into the gas grid. The volume of biomethane injected into the grid in 2023 was small, equating to c.60 GWh per annum, which is equivalent to 0.001% of Ireland’s current gas demand.

The National Biomethane Strategy sets out a pathway to address the challenges in achieving target delivery and outlines the necessary supports and policy enablers needed to drive growth across the biomethane sector. A full progress report on delivery of actions within the National Biomethane Strategy is now published on the Biomethane policy information page on the Gov.ie website.

A combination of capital grants and the introduction of the Renewable Heat Obligation (RHO) has been agreed by Government.

At present, the first financial support package available to underpin the Strategy is €40m RePowerEU capital secured by the Department of Agriculture, Food, and the Marine through the Department of Public Expenditure. Funding for the second round of capital grants has been secured through the National Development Plan and Infrastructure, Nature and Climate Fund. I understand this capital will be available to support anaerobic digestor plants from 2025.

The tax treatment of biofuel is governed by the EU Energy Tax Directive (ETD), which allows Member States to apply partial or full reliefs or reduced rates of tax to biofuels produced from biomass.

The Finance Act 1999 legislated for the transposed provisions relating to transport-related fuels, which applies excise duty in the form of Mineral Oil Tax (MOT) over liquid and gas-type of fuels, where the Carbon components of those fuels that are produced from biomass are then provided with full relief from taxation. This means that no carbon tax applies to biofuels, such as Hydrogenated/Hydrotreated Vegetable Oil or biomethane, used in any road vehicle, private or commercial. Thus, as annual increases in the carbon component of MOT are implemented, the differential in tax costs between biofuels and fossil fuels will continue to widen, further incentivising the uptake of biofuels.

From a corporation tax perspective, a company may, in general, claim capital allowances on capital expenditure it incurs in the carrying on of its trade on certain types of business assets and business premises (such as plant and machinery, and industrial buildings for example). Capital allowances are claimed at a rate of 12.5% over eight years for plant and machinery and 4% per annum for industrial buildings.

Accelerated capital allowances (ACA) are available in respect of energy efficient equipment and gas vehicles and refuelling equipment. ACA schemes provides for a 100% up-front wear and tear allowance for qualifying expenditure incurred in a given year. Therefore, the entire cost of equipment can be written off in full in year 1. This provides a cash flow benefit to the taxpayer.

The ACA gas vehicles and refuelling equipment scheme aims to contribute to the transition toward a low carbon economy by seeking to accelerate the de-carbonisation of the transport sector and support the transition from fossil fuels by incentivising the use of compressed natural gas (CNG), liquefied natural gas, biogas or hydrogen, particularly in the heavy-duty land transport sector.

It should be noted that where any tax measure is targeted at a specific industry or sector (such as biomethane production or grid injection facilities), State aid implications need to be considered.

Any decisions regarding taxation measures are made in the context of the annual Budget and Finance Bill processes, at the appropriate time, and having regard to the sound management of the public finances.