Green diesel could be in the firing line for a major tax hike in the upcoming budget.

Both the Central Statistics Office and the tax strategy group at the Department of Finance have raised the spectre of serious price increases, by classifying the low excise levels charged on green diesel as a fossil fuel subsidy.

A differential of up to 54c/l currently exists between road diesel and green diesel because of the contrasting tax treatments of the fuels.

As the farm sector uses over 1bn litres of green diesel each year, any hike in taxes would have serious cost implications for farmers.