Chancellor urged to address red diesel in Budget

MPs have called upon the Chancellor, Philip Hammond, to end tax relief for the use of ‘red diesel’ — particularly in mobile refrigeration units, ahead of the budget next week (October 29).

“Red diesel” is the fuel used in non-road vehicles such as agriculture and construction machinery, and is believed to account for around 15% of the total diesel usage within the UK.

Low emission technologies are being held back by the continued use of red diesel, companies and MPs have claimed

The fuel currently benefits from a tax rebate of 46.81ppl giving an effective rate of 11.14ppl, which currently costs the Treasury around £2.4 billion per year in revenue, compared to diesel charged at the main rate.

In recent months the Treasury has carried out a wide-ranging investigation into the usage of red diesel in UK industries, including whether the lower taxation rates are discouraging the purchase of cleaner alternatives (see airqualitynews.com story).

Critics argue that by incentivising the use of red diesel through favourable taxation rates, and relatively lower emissions standards for secondary engines on vehicles, efforts to address address air quality in urban areas are being undermined.

Refrigeration

This includes the ‘clean cold’ specialist Dearman, a Croydon-based company which has developed a zero-emission transport refrigeration system, which replaces diesel with liquid nitrogen in refrigeration trailers and trucks, as well as other potential power and cooling applications.

Large retailers including Marks & Spencer and Sainsbury’s are among those to trial the Dearman technology in transport refrigeration applications, but the company argues that further advances are being held back by the favourable treatment of red diesel.

Chancellor Philip Hammond will announce his Budget on Monday (29 October)

Ahead of the Budget this month, the Liberal Democrat MP for Carshalton and Wallington, Tom Brake, has tabled a motion encouraging the Chancellor to ‘end red diesel access for transport refrigeration’.

The motion has garnered support from five other MPs, including the Labour chair of the All Party Parliamentary Group on Air Pollution, Swansea West MP Geraint Davies.

The motion states that: “transport refrigeration units used by fleet operators is one area where access to cheaper red diesel disincentivises uptake of alternative clean technologies”.

It continues: “if the up to 34,000 transport refrigeration units in the UK using red diesel switched to zero emission alternatives, it would equate to removing the nitrogen oxide emissions of 1.8 million Euro 6 diesel cars”.

It ends by noting that HM Treasury’s red diesel subsidies for transport refrigeration are worth an estimated £100 million and backs the Chancellor to use the Budget to end red diesel in this area.

Dearman has welcomed the motion, claiming that ending the use of red diesel in transport refrigeration units would ‘help boost Britain’s air quality’.

Commenting on the motion, Dearman chief executive Scott Mac Meekin, said: “We welcome this parliamentary motion and especially the cross-party nature of it. Chancellor Philip Hammond was right to launch the red diesel call for evidence this year.

“We back the Chancellor to take the next step and end red diesel access for transport refrigeration. This would encourage a shift to existing zero emission technologies and help boost Britain’s air quality.”