‘Cleanest fuel, highest tax’: Louth Councillor demands VAT ‘overhaul’ on biofuel
"As a small farmer, this is the busiest and most fuel-dependent time of the year,” a Louth councillor warned as he called on the government to “urgently overhaul” the VAT and tax on Hydrotreated Vegetable Oil (HVO) biofuel.
Cllr. John Reilly, a member of Louth County Council and a small farmer from Faughart in north Louth, said farmers were being “penalised” for choosing low-emission alternatives.
Cllr. Reilly, who previously worked in the oil industry, described HVO as “a proven, low-emission, drop-in replacement for diesel — capable of reducing greenhouse gases by up to 90%, according to several independent industry assessments.”
He noted that Louth County Council has already moved to HVO for parts of its own operations, and said farmers should not face higher VAT rates for switching to more environmentally friendly fuel options.
“As a small farmer, this is the busiest and most fuel-dependent time of the year,” Reilly explained. “Ploughing, sowing, and preparing the land demand long hours and significant fuel. Having spent years in the oil sector, I know the current fuel tax system — and right now, it penalises farmers who choose cleaner, greener fuel.”
Under current VAT rules, farmers using HVO face a hefty 23% VAT, while traditional green diesel is taxed at just 13.5%.
“It’s illogical that the cleanest fuel is taxed the most. Farmers are urged to reduce emissions, but when they try, they’re hit with higher costs," Reilly pointed out.
He highlighted that while sectors like haulage, logistics, local authorities, and emergency services are quickly adopting HVO, Irish farmers are being left behind due to outdated tax policies.
“With Ireland facing a looming fuel supply challenge, it’s critical that duties and VAT are reviewed immediately," he urged. "Farmers are already battling rising costs, and yet, for choosing a fuel that can cut emissions by 90%, they face the highest VAT rates."
Reilly called on the Minister for Finance and the Minister for Agriculture to take action by lowering the VAT rate on HVO for farmers, and introduce incentives to help farmers switch to cleaner fuels
"If the Government truly wants to lead on climate action in agriculture, it cannot continue to treat the cleanest fuels as luxury products. This policy must change, now," he insisted.