The Government is to forego €200 million in excise duties over the next five years as part of a scheme to encourage the use of environmentally friendly fuels in Irish transport.
When the scheme is running at full capacity in 2008, it will result in 163 million litres of biofuels being available, representing 2.2 per cent of the entire fuel market.
Minister for Communications, Marine and Natural Resources Noel Dempsey, who launched the scheme, said it would prevent 1.2 million tonnes of CO2 being released into the atmosphere over the lifetime of the scheme.
This equates to taking about 70,000 cars off the road each year of the scheme.
"It will provide a significant opportunity for farmers and potential developers to build a new biofuels sector in Ireland, providing alternative sources of income and local employment," said Mr Dempsey.
Mr Dempsey also said the scheme would provide a local market for waste products such as used vegetable oil and tallow, which are currently exported at significant cost to the producers.
He said the scheme was a significant step in Ireland's compliance with the EU Biofuels Directive. The European Commission has accepted the target of 2.2 market penetration for bio-fuels as close to the maximum that could be produced in Ireland given current land use patterns.
Applications for the excise relief can be made over the next five weeks and will be rewarded on a competitive basis.
Applications will be accepted for four different categories of biofuel: biofuel blended with diesel, bio-ethanol blended with petrol, pure plant oil for use in modified diesel engines, and pure biofuels for use in dedicated vehicle fleets.
A scheme providing capital grants for biofuel production facilities is currently being designed and will be launched later in the year.