Complaint made to EU over State policy on financing climate fund

A lobby group for leading oil retailers and distributors in the Republic has lodged a complaint with the European Commission, alleging that Government policy on funding the Climate Action Fund breaches European Union state-aid rules.

Fuels for Ireland (formerly the Irish Petroleum Industry Association) has lodged the complaint on behalf of 10 oil distributors. It claims the State has put in place a “discriminatory fiscal measure” that gives competitive advantages to rivals involved in gas, solid fuels and electricity from non-renewable sources.

At present, a 2 cent-a-litre levy, dating back to 2007, is applied to home heating oil and petrol and diesel products used for motor vehicles. This money has been used to pay the operating costs of the National Oil Reserves Agency, which is mandated to meet the State’s international obligation to maintain 90 days of oil reserves.

According to Fuels for Ireland, this levy has generated a surplus of about €300 million in the agency’s funding. The representative group claims that an amendment to legislation last year provides for the diversion of this levy, at the discretion of the Minister, to the Climate Action Fund which was established to provide support to projects that will help the State achieve its climate and energy targets.

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The fund will provide at least €500 million in Government funding for climate projects up to 2027. To date, none of the agency funding has been diverted.

Fuels for Ireland claims the levy paid by its members, who include Applegreen, Circle K, Maxol and Irving, will be used to finance the Climate Action Fund, putting them at a disadvantage to their non-oil rivals who are not required to pay the levy.

It said this difference in treatment is “unjustified, arbitrary and discriminatory, which leads to an advantageous benefit accruing to our members’ competitors”.

In its complaint, Fuels for Ireland argues that the levy should be reduced to zero “until such time as existing cash reserves [to fund the agency] are reduced to the statutory minimum requirement”.

Fuels for Ireland said its members accept that oil companies should be asked to contribute to a Climate Action Fund but that should be via a carbon tax, which would also capture contributions from its non-oil energy competitors.

‘Levies from oil companies’

It has told the commission that the fact that there is a significant surplus in the agency levy fund “which exists . . . is not a sufficient reason to differentiate between oil companies and other energy providers”.

According to Fuels for Ireland, the agency levies generated €120 million last year, with its running costs coming to between €40 million and €45 million a year. This leaves a surplus from the levy of up to €80 million annually.

“Fuels for Ireland has a significant and real concern that the Irish Government’s stated budget of €500 million budget for the Climate Action Fund will be funded solely by levies obtained from oil companies” as part of the agency levy process, its complaint states.

“Clearly the exemption provided for non-oil based energy providers to contribute to the Climate Action Fund is discriminatory and untenable in such circumstances and amounts to illegal State aid.”

Fuels for Ireland chief executive Kevin McPartlan claimed its members had been “unfairly targeted” in being the sole contributors to the Climate Action Fund .

“We have brought this matter to the attention of the Minister [Eamon Ryan] and the department on several occasions. The State is discriminating against people who use home heating oil to keep their homes warm, put petrol or diesel into the cars to get to work or bring their kids to school and we have been forced to bring this issue to the European Commission through this State-aid complaint,” he said.

In a statement, a spokesperson for the Department for Communications, Climate Action and the Environment said: “‘The Climate Action Fund was established on a statutory basis in 2020 to provide support for projects, initiatives and research that contribute to the achievement of Ireland’s climate and energy targets.

“The fund is resourced from levy proceeds paid to the National Oil Reserves Agency by oil companies in respect of relevant disposals of petroleum products, after the funding requirements of NORA have been met. The oil companies are liable to pay the levy on relevant petroleum products placed on the market.

“In relation to the complaint lodged by Fuels for Ireland, the Department will engage as appropriate, and as required, with the European Commission in relation to this complaint.”