Farm contractors critical of threat to ‘green’ diesel subsidies

Farm and forestry contractors have said proposals to abolish “green” or agricultural diesel will add more than €170 million a year to their costs and increase food inflation.

The Association of Farm and Forestry Contractors in Ireland (FCI) said the proposal would add in excess of 50 cent per litre of diesel to the cost of their operations.

The abolition of excise relief for green diesel for farm contractors is one of a number of measures considered by the Government’s Tax Strategy Group.

It arises partly from a CSO research paper which found that potentially environmentally damaging subsidies (Peds) cost billions of euro every year, with the vast majority of this relating to the excise rate on auto-diesel, marked gas oil (green diesel) and Kerosene, as well as the excise exemption for aviation fuel.

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The Department of Finance has estimated the cumulative cost of Peds in relation to green diesel alone, in the period 2012 to 2019, was €4.2 billion. In the same period carbon tax receipts were some €2.8 billion.

However the Association of Farm and Forestry Contractors said it wants the Tax Strategy Group to review the effect of eliminating green diesel for its members.

It said it wants “a financial and technical assessment of the actual costs to Irish farming’s competitiveness of removing the excise duty differential between green diesel used in agriculture and white diesel used in the transport sector”.

The association said its own research showed that the sector consumes upwards of 340 million litres of diesel annually, close to 62percent of all diesel fuel consumed in Irish agriculture.

John Hughes, FCI national chairman said “adding more than 50 cent per litre to the current high green diesel prices, which have already increased by over 55 per cent since 2020, will further increase the Carbon Tax component of the diesel price.

“This will push the diesel cost to Irish farm and forestry contractors up by more than €170 million annually. Contractors have no alternative power sources to the diesel engine to power their machines and they will be forced to pass any significant fuel cost increases on to their farming clients in the form of substantial increases in contractor charges in 2022.

“The Irish farming and food industry and the Irish economy will be the loser as will the national balance of payments if we are not able to sustainably produce food in a world competitive way,” he said.