We would like to update you that last week the Ministry of Economy and Industry published for public comments Director General Directive 4.79, regarding a grant program intended to support the industrial sector in adaptation in light of the expected increase in fuel tax – “Carbon Tax” (hereinafter: the Grant Program and the Director General Directive), following the approval of the mechanism for the taxation of greenhouse gas and local pollutants emissions by the Knesset on September 30, 2024, as detailed below (hereinafter: the Carbon Tax).

As we previously updated in January 2024 and in September 2024, according to Government Decision 1261, the Carbon Tax is expected to come into effect on January 1, 2025, through amendment of the Fuel Tax Ordinance (imposition of fuel tax), 2004, applicable to fuel producers, and of the Customs Tariff and Exemptions and Purchase Tax on Goods Ordinance, 2017, applicable to fuel importers. The mechanism will implement a gradual increase in fuel tax and purchase tax rates by fuel type, starting from 2025 until the beginning of 2030, when the tax rates will fully internalize the external cost resulting from fuel consumption.

The Grant Program, which was established in accordance with Government Decision 1261, is the result of collaboration between the Ministry of Finance, the Investment and Development Authority for Industry and Economy in the Ministry of Economy and Industry, the Ministry of Energy and Infrastructure and the Ministry of Environmental Protection. Its purpose is to support industrial plants that consume fuels in adapting to the Carbon Tax, and to create business certainty regarding the investments that will be required of industrial plants in order to increase efficiency, transition to alternative fuels and improve production processes.

The Director General Directive sets out the threshold conditions for submitting an application for financial aid based, among other things, on the field of activity of the plant and the extent of fuel usage in the plant. Additionally, the Director General Directive includes a formula for calculating the amount of aid to be provided per year, which will be given for a maximum period of six years, from January 1, 2025, to December 31, 2030, as well as provisions regarding the start date for the Grant program.

The Director General Directive further explains the procedure for submitting an application and for its approval by a designated committee that will be composed of representatives of the relevant government ministries as detailed above, as well as an administrative appeal mechanism for rejected applications.

According to the publication on the Ministry of Economy and Industry’s website, it will be possible to submit applications under the Grant Program starting from December 19, 2024, and applications will be reviewed on a first-come, first-served basis until the budget is exhausted.

Comments on the Grant Program may be submitted until November 21, 2024.

To view the full publication on the Ministry of Economy and Industry’s website, including the Director General Directive and its appendices (in Hebrew) >> click here.

We are at your disposal for assistance in submitting comments on the Grant Program, as well as for other questions and clarifications on this matter.

Hoping for calmer days,

The Environment and Climate Change Practice

The above is intended to present the main issues and does not constitute legal opinion or advice.