Gabhaim buíochas leis an Aire Stáit as ucht teacht isteach chun an cheist seo a fhreagairt. HVO is hydrotreated vegetable oil. Essentially, it is a substitute for diesel. The interesting thing about HVO is that it does not require engine modifications or new infrastructure. People who wish to use it as a substitute for diesel do not need to spend money on changing their engines or modifying systems in order to use it. What is even more interesting is that it can achieve a 90% reduction in carbon emissions when it is utilised and it emits far less carbon monoxide, nitrous oxides and soot generally compared to diesel. As a fuel it is incredibly advantageous to us at a time when we are trying to cut emissions. We know that transport is particularly targeted for emissions cuts. Although it has decreased emissions in the past year by 1.8%, the sector is about 8% behind where it is supposed to be.

As we talk about climate emissions and climate targets, and we talk about trying to put in place systems to help us meet these targets, this is a key tool. It will not do it on its own but it is a key way in which we can do it. The difficulty is that we have no incentive for people to use HVO instead of diesel. There is not nearly enough information out there for people using diesel cars to allow them to understand that HVO is there as an alternative. I know Government policy relates to EVs and the infrastructure that goes with them, and I support the proliferation of electric vehicles as they are a hugely important part of our climate solution, this will take time. We have seen a ramp up in the purchase of electric vehicles and this is very welcome but this is the here and now.

This issue goes across a number of Departments, including transport, energy and finance. In the week that is in it, next week there will be a real opportunity for us to incentivise HVO as a fuel for all cars. What can be done? HVO is subject to VAT and the same mineral oil tax as diesel and other fuels. VAT is obviously something that cannot be modified or changed in relation to one product or another subject to the VAT directive of the European Union, so I understand it is not something the Government can tinker with. However, the mineral oil tax is something that can be changed. We can change the liability in relation to HVO in mineral oil tax and the extent to which it is liable. This is something we are permitted to do under European law and it is not restricted by the VAT directive.

There is a key tool at the Government's disposal now. We can incentivise the use of HVO. We can incentivise for people a fuel that does not require them to change their engines or require new infrastructure, and which would reduce carbon emissions by 19% and reduce harmful emissions from carbon monoxide and the soot that comes out of diesel engines. To my mind this is an obvious thing to do and I do not understand why we have never done it. This is not the first time I have raised it here. There is an incentive to do it from the point of view of the State because we want to reduce emissions. There is also a situation whereby very few people are using HVO. There would not be a massive revenue impact from it if we were to incentivise it.

We are now in the context of a fuel crisis. We are aware we cannot control the wholesale price of fuel in this country because of wars in Iran, in the Middle East and in Ukraine. We understand the crisis is there. We came back at the end of August to vote to ensure the reduction in the excise on fuel continued because we know we have to safeguard it. We are talking about doing this and reducing the carbon tax but here is an intensively positive carbon measure that we can incentivise through the budget next week to reduce the liability for people using HVO, and to do so in tandem with a campaign to show people who are driving diesel cars. We recognise the reality that diesel cars are necessary but that there is an alternative there for them that is better for all of us.

I thank Deputy Ward for raising this matter in the House today. The Government recognises the environmental benefits of incentivising the uptake of transition fuels such as HVO in place of heavier pollutants such as auto diesel. While HVO has a part to play in the here and now, Ireland must, nevertheless, move to more sustainable methods of transport in the medium to long term.

In relation to private transport the Government remains committed to incentivising the uptake of more electric vehicles, something which Deputy Ward also welcomed, on the road in place of internal combustion engines. This must remain the ambition. In the first half of this year electric vehicles were the leading individual fuel type for new car registrations. That being said, the Government understands the transition to decarbonise Ireland's existing vehicle fleet will take some time.

As Deputy Ward may know, the mineral oil tax treatment of biofuels, including HVO, already financially incentivises biofuels over fossil fuels such as diesel. Biofuels produced from biomass qualify for a full relief from the carbon tax, thus incentivising the uptake of more sustainable and renewable fuels. In the case of blended fuels the biofuel relief applies to the biofuel portion. The rate of the carbon tax relief for biofuels such as HVO used in place of auto diesel is around 23 cent per litre on a VAT inclusive basis. This, it must be acknowledged, is already a significant relief. As biofuels are relieved of the carbon component of mineral oil tax, they are not impacted by annual carbon tax increases. As a result, the mineral oil tax rate differential between biofuels and fossil fuels will continue to widen as the ten-year carbon tax trajectory up to 2030 is implemented, thus incentivising further uptake of biofuels.

Furthermore, the renewable transport fuels obligation scheme under the remit of the Minister for Transport obliges suppliers of mineral oil to ensure that a percentage of the motor fuel they place on the market in Ireland is produced from renewable resources. The target by 2030 is to deliver a 20% biodiesel mix, which will help to significantly reduce emissions.

The programme for Government also committed to examining the taxation of HVO used for commercial freight to support sustainable transport solutions and decarbonisation of road freight and commercial coaches with fuels such as HVO, hydrogen and biomethane. Work on these commitments is ongoing, including the examination in this year's and last year's tax strategy papers published by the Department of Finance.

However, it must be pointed out that the availability of renewable transport fuels, including HVO, will remain constrained given the current global product production capacity, the need for sustainable feedstock and increasing demand from various sectors to use renewable fuels in the decarbonisation journey. While tax levers can support policy measures, it is important to acknowledge that there is a limit to the role they can play in terms of price leverage.

The price of HVO is dependent on many factors. However, I assure the Deputy that the Government is conscious of the programme for Government commitment and it will continue to examine the potential to increase existing supports for HVO in recognition of the positive role it can play in our decarbonisation journey, as he set out.

I thank the Minister of State. I acknowledge what she has said. I note what she said about the commitment in the programme for Government to examine taxation in relation to HVO. I agree with her in relation to EVs, and I welcome that EVs were the more sold vehicles in 2025. I presume, and hope, that this will be even more the case in 2026.

In relation to carbon tax, I acknowledge what the Minister of State said regarding it not applying to biofuels, as is appropriate. The notion that this is the only incentive that we are really willing to countenance to encourage people to use HVO is, I think, shortsighted. This is particularly the case if we are going to be talking in the budget next week about reducing carbon tax generally to alleviate the burden on individuals and households. If that is the case, then we will be eradicating the incentive that is there to use HVO. When we have HVO as a fuel that emits less carbon, 90% less carbon, and reduces harmful gases like nitrous oxides and carbon monoxide, as well as soot, there is so much behind the idea that we should incentivise the use of HVO.

I do not think it is enough to say, then, that the incentive will be the widening gap over time, as the carbon tax increases, between ordinary, standard auto diesel and biofuels or mixes with HVO. We can take positive action now. We can reduce the mineral oil taxation when it comes to biofuels, particularly in the case of HVO. We know that is something that will directly impact our attempt to meet our climate objectives in terms of reducing emissions and to encourage people to use HVO, which is a much better and sustainable fuel and one we can somewhat control in a way we cannot control the imported petrochemical products that come from the Gulf and other parts of the world.

An obvious track is available to us next week. If we actually take the step of saying that HVO is something that people should be using, it will benefit everyone. It will benefit the State, the environment and the individual citizen. We have an opportunity next week to do that. It will be a real missed opportunity if we do not, and it does not make sense if we do not do so.

I thank the Deputy for his further comments. As mentioned, the tax treatment of 100% HVO used in place of diesel is already incentivised through the tax system. On a VAT-inclusive basis, 23% less excise duty is charged on 100% HVO fuel when compared with auto diesel. The renewable transport fuel policy also sets out a pathway for the achievement of the climate action plan biofuel targets and EU renewable energy directive targets for an increased share of renewable energy in transport. This is achieved through the renewable transport fuel obligation, RTFO, which obliges mineral oil suppliers to ensure that a percentage of the motor fuel they place on the market in Ireland is produced from renewable sources.

Sustainable renewable transport fuels, such as HVO, provide immediate climate mitigation benefits, as the Deputy outlined, utilising the existing vehicle fleet. They will, therefore, continue to play an important transitional role in the decarbonisation of transport in the coming years as the shifts to electrification and further increases in public transport and active travel are fully realised.

I note that a study on the hierarchy of the use of HVO across transport and other sectors has recently been finalised by the Minister for Transport. The report addresses the most efficient use of HVO relative to available renewable energy and zero-emission alternatives across all transport modes, as well as HVO use in non-transport sectors. The report produced a hierarchy of use of HVO, which aligns with several existing policies and measures, including the sustainable aviation fuel task force report, the road haulage strategy, the renewable transport fuel policy, the ports policy and the design of the renewable heating obligation. This will also inform ongoing policy for renewable energy in transport.

Ultimately, HVO is a commodity traded on the open market, the price of which is susceptible to global market supply-and-demand factors like crude oil, and there is only so much the tax system can do to incentivise its use. The Government, though, has acted to ease the burden of recent increases in fuel prices, as we saw last April.