Ireland has few fossil fuel resources of its own and hence imports most of its fuels. Indigenously produced energy sources include natural gas, combustible renewables, biofuels and waste, and some peat. Until 2016, due to the depletion of the national mature gas fields, 96% of the gas consumed in Ireland was imported via an interconnector with the United Kingdom. However, in 2016, the Corrib field — which had been discovered in 1997 but its start-up was delayed until the end of 2015 — allowed to significantly reduce gas imports which met almost 30% of its national supply in 2021.
OECD Inventory of Support Measures for Fossil Fuels: Country Notes
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Ireland
Energy resources and market structure
Source: IEA (2022), "World energy statistics", IEA World Energy Statistics and Balances (database).
The energy sector is characterised by a mix of private and publicly owned companies. The oil industry is fully deregulated and privatised with several companies competing in the retail sector. Prior to 2001, the Irish oil industry was composed by only one state-owned oil refinery (Whitegate), with a capacity of up to 75 000 barrels per day, owned and operated by The Irish National Petroleum Company. That year the refinery was sold to Tosco Corporation for USD 100 million. The refinery is currently operated by Irving Oil and supplies approximately 40% of Ireland’s transport and heating fuel.
In Ireland, state-owned companies dominate electricity, peat, and natural gas markets, with 33% share of generation being held by the Electricity Supply Board (ESB). ESB’s share of power generation has been falling with the entry of new power producers but it continues to own the distribution network and the transmission system, with the latter being operated by EirGrid. For natural gas, Gas Networks Ireland (GNI) own, operate, build, and maintain the natural gas network in the country. GNI connects all customers to the network regardless of which natural gas supply company the customer chooses. The country’s main peat producer, Bord na Móna, is a semi-state company.
Energy prices and taxes
Energy prices are deregulated and set by the market. Customers have the option of switching suppliers. Ireland has an independent regulator, The Commission for the Regulation of Utilities, which regulates electricity and gas network charges. Apart from gasoline and diesel fuels used on roads that is taxed at the normal VAT rate of 23%, general fuel and energy services are subject to a special VAT rate of 13.5%. Excise taxes are levied on all oil products used as fuel, as well as on natural gas, coal, peat, and electricity. While in the case of oil products the excise charge incorporates a component based on the fuel’s carbon emissions, for natural gas and solid fuel (i.e. coal and peat) the excise duty charge is entirely based on the fuel’s carbon emissions. The National Oil Reserve Agency (NORA) which is tasked to hold strategic oil stocks for supply in an emergency, also charges a monthly levy, on most disposals of petroleum products (except LPG) in the preceding month.
Figure 2. Total tax rebates and support for fossil fuels in Ireland
1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports). Support measures for which such information is not available are excluded from the aggregate amount reported in this table. In addition, support measures in certain countries may not have been exhaustively identified.
2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.
3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.
4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.
Source: OECD Inventory of support measures for fossil fuels (2023).
Recent developments and trends in support
In response to high energy prices of 2022, the government announced a series of measures. Primarily three different “one-off” transfers to various energy users, and reduced VAT on energy products that was extended as high prices persisted.
The fiscal cost of support measures for fossil fuels in Ireland was estimated at EUR 4.94 billion in 2022 (Table 1). Ninety-six per cent (96%) was directed at end user beneficiaries, as opposed to 3% directed to firms. Support was mainly given out in the form of tax expenditures (EUR 3.53 billion) accounting for 72% of the total fiscal cost of support measures. Direct transfers amounted to EUR 1.40 billion.
The fiscal cost of support measures for fossil fuels has increased by 107% since 2017. Since last year, tax expenditures have increased by 76%, from EUR 2.16 billion to EUR 3.53 billion and direct transfers increased by 386%, from EUR 0.28 billion to EUR 1.40 billion. All growth rate percentages above are expressed in terms of nominal national currency amounts.
Table 1. Fiscal cost of support measures for fossil fuels (in billions of national currency)
|
|
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
|---|---|---|---|---|---|---|
|
Tax expenditures |
2.028 |
2.276 |
2.351 |
1.796 |
2.163 |
3.534 |
|
Direct transfers |
0.354 |
0.305 |
0.262 |
0.291 |
0.280 |
1.403 |
|
Total |
2.382 |
2.581 |
2.613 |
2.087 |
2.443 |
4.937 |
1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports). Support measures for which such information is not available are excluded from the aggregate amount reported in this table. In addition, support measures in certain countries may not have been exhaustively identified.
2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.
3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.
4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.
Source: OECD Inventory of support measures for fossil fuels (2023).
Table 2 highlights a selection of support measures associated with a large fiscal cost. A description of these measures is provided in Table 3.
Table 2. Selected support measures for fossil fuels with a large fiscal cost (in millions of national currency)
|
Measures associated with large fiscal cost in 2022 |
2022 |
2017 |
Variation since 2017 |
|
|---|---|---|---|---|
|
Tax expenditures |
||||
|
Revenue Foregone: Excise Duty on Autodiesel |
888.070 |
388.200 |
499.870 |
|
|
Reduced VAT Rate on Energy Products |
523.788 |
249.000 |
274.788 |
|
|
Jet Kerosene Excise Exemption |
478.700 |
580.200 |
-101.500 |
|
|
Direct transfers |
||||
|
Utility Bill Support |
695.151 |
(Started in 2022) |
695.151 |
|
|
Increase Energy Credit for Consumers |
305.697 |
(Started in 2022) |
305.697 |
|
|
Household Benefits Package - Gas, Fuel, Heating and Smokeless Coal Allowance |
256.330 |
113.400 |
142.930 |
|
1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports).
2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.
3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.
4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.
Source: OECD Inventory of support measures for fossil fuels (2023).
Table 3. Description of selected support measures for fossil fuels
|
Revenue Foregone: Excise Duty on Autodiesel |
Excise duty (including carbon tax) on autodiesel was EUR 479.02 per 1 000 litres in 2019. Excise duty (including carbon tax) on petrol was EUR 587.71 per 1 000 litres. The revenue foregone by the State due to the reduced tax rate on autodiesel compared to a benchmark or reference rate of the excise duty on petrol is calculated as the difference in the rates multiplied by the volume of autodiesel purchased. Tax rate reduction (Excise Duty), Beneficiary: households, businesses, |
|
Reduced VAT Rate on Energy Products |
Energy products are subject to the reduced rate of VAT at 13.5%. Estimates of the revenue foregone due to the reduced rate versus the standard rate (23% in 2020) were made using data on personal consumption expenditure on electricity, gas, solid fuels, and liquid heating fuels from National Accounts. |
|
Jet Kerosene Excise Exemption |
This is a tax exemption for jet kerosene used for commercial aviation. The figures are estimated using the volume of jet kerosene purchased in Ireland as published by the SEAI (Energy Balances). The reference excise charge was taken to be the rate on heavy oil used for air navigation, i.e. EUR 479.02 per 1 000 litres in 2019. Tax exemption (Excise Duty), Beneficiary: aviation industry (transport). |
|
Utility Bill Support |
The measure aims at supporting consumers with the costs of utilities in 2022 and 2023. Concretely, it consists of a EUR 600 credit paid to all domestic electricity customers. It should be noted that Ireland put in place significant additional income support, though not explicitly earmarked to higher energy prices but rather into the broader category of cost-of-living measures. The credit will be paid in three instalments of EUR 200 (November, January, and March). |
|
Increase Energy Credit for Consumers |
The Irish government increased its energy credit from EUR 100 to EUR 200 (including VAT) to households. The credit payment will be paid by Government at the end of March 2022 and appear as a reduction for March/April electricity bills. |
|
Household Benefits Package - Gas, Fuel, Heating and Smokeless Coal Allowance |
The gas allowance is part of the Household Benefits Package, which is available to all householders over 70 and to householders under 70 in certain circumstances. The fuel allowance is a social welfare payment to households. It is a means-tested subsidy towards the cost of fuel with the objective of preventing fuel poverty. A coefficient of 0.4 is applied to the heating supplement to take account of the fact that it is only partly used to support households with their heating costs. This coefficient is also applied to the fuel allowance to account for purchases of wood and for other non-fossil fuel purchases. The smokeless coal allowance was paid to low-income households to help them meet the extra costs of using smokeless or low smoke fuels. |
Data sources
Note on the Methodology
Aggregate numbers from the Inventory represent the fiscal cost of support measures for fossil fuels. They should not be interpreted as a level of support for fossil fuels, nor as an indicator of the extent to which the considered policies are favourable or unfavourable to climate mitigation.
The Inventory reports tax expenditures as estimates of revenue foregone due to measures that reduce or postpone tax payments relative to a jurisdiction’s benchmark tax systems to the benefit of fossil fuels producers or users. Tax expenditure estimates can thus increase over time due to either an increase in the offered concession (relative to benchmark tax systems) or an increase in the benchmark itself. Cross-country comparisons of tax expenditures can also be misleading due to differences in countries’ benchmark tax systems.