Ireland could take ‘leading role’ in aviation’s net zero transition, says PwC

Ireland has a chance to “take a leading role” in the aviation sector’s transition to net zero carbon emissions by 2050 by providing tax relief for companies working to develop sustainable aviation fuel, PricewaterhouseCoopers has told the Government.

The professional services giant, which advises companies on tax, has also said a tax-saver scheme for hybrid workers could go a long way towards encouraging use of public transport and good consumer behaviour generally.

The proposals are included in PwC’s pre-budget submission on climate action. Highlighting analysis by the Environmental Protection Agency, the company said Ireland was falling critically short of its emissions reduction target of 51 per cent by 2030.

While carbon budgets “are a crucial aspect of the Government’s armoury here”, PwC said tax policy could act as “another critical lever” in achieving its climate targets.

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In particular, PwC said that, as a big centre for aircraft leasing operations globally, Ireland “has the opportunity to take a leading role in the aviation sector’s journey to net zero”.

Sustainable aviation fuel, which PwC said was expected to be a “core driver of the sector’s decarbonisation” process, will require investment from the private sector. To “promote Ireland as a cluster for innovation”, the Government could look at providing tax relief for new investment into companies working on developing new types of such fuel.

“Currently one of the most significant barriers to the use of sustainable aviation fuel is cost,” the company noted in its submission. A tax credit for Irish producers and distributors of alternative aviation fuels might also help “bridge the gap between the cost of traditional fossil jet fuels and sustainable aviation fuel”, it said.

Extending the current accelerated capital allowances scheme to include energy-efficient aircraft and fuels, meanwhile, could also “reward aircraft lessors and airlines alike to focus on developing a more energy-efficient fleet”.

Among other things, PwC said Budget 2022 should focus on transport and housing infrastructure, encouraging private investment and establishing Ireland as a green finance hub.

On transport, the company said extending the tax-saver scheme to hybrid workers could be considered.

“Currently, all employees of companies (including company directors) that choose to participate in the tax-saver scheme are eligible, provided the commuter tickets are applied for and supplied by the employer,” PwC said. “While the tax-saver initiative is positive, it is not flexible enough to offer the same level of savings to commuters who are only using public transport less than two to three days a week.”

PwC’s submission has also called for further tax breaks to “unlock” Ireland’s renewable energy potential, which it said, in addition to public money, would need “significant private investment”.