The Irish Government spends a total of €4.1bn on environmentally damaging subsidies and taxes forgone each year according to a new analysis published by the Central Statistics Office.

The report titled "Fossil Fuel and Similar Subsidies 2012 2016" says that direct and indirect fossil fuel subsidies amount to €2.5bn per year. Another €1.5bn in potentially environmentally damaging subsidies go the agriculture sector.

The CSO says that a subsidy is classified as environmentally damaging if it is likely to incentivise behaviour that could damage the environment irrespective of its importance for other policy or social support objectives.

For instance it classes subsidies such as the fuel allowance for low income households to alleviate fuel poverty as a potentially environmentally damaging subsidy that could result in increased greenhouse emissions though unnecessary use of fossil fuels.

An alternative according to CSO would be the refurbishment of properties through improved attic, wall, floor, and window insulation grants that could greatly reduce the energy required to heat a dwelling.

In addition the analysis also examined indirect subsidies including tax revenues forgone by the imposition of lower excise duties on diesel, kerosene, gas, oil, aviation fuel, and other fuel oil.

In the agriculture sector the analysis appears to class most farm related subsidies and supports as potentially environmentally damaging.

This includes not just direct farm support payments but also revenues forgone by granting a zero rate of VAT for fertiliser, VAT refunds for farmers, Agricultural Capital Tax Relief, Stamp Duty relief for young farmers, and much more.

According to the CSO analysis, 56% of all the potentially environmentally damaging subsidies are indirect in nature for example having a lower rate of VAT or excise duty.

The remaining 44% is accounted for by direct government subsidies such as the transfer of €115m from electricity consumers through the PSO levy to subsidise the burning of peat to generate electricity, or the direct payment of €400m euro per year to households in fuel, gas, and electricity allowances.

The €1.5bn in potentially environmentally damaging subsidies for agriculture does not include the revenue foregone on so called "green diesel" or marked gas fuel oil used by farmers.

This is diesel that is taxed at a substantial discount for use in tractors, farm machinery and some construction machinery.

The tax revenue foregone on green diesel is estimated to cost the exchequer over €500m a year.