Exclusive: Government accused of ignoring clean fuels as red diesel tax ‘loophole’ stays

On the eve of London’s Ultra Low Emission Zone (ULEZ), which will try and stop ‘dirty diesels’ from entering the capital, the government has been criticised for deciding against closing a tax ‘loophole’ that allows large private businesses to pay over five times less tax on diesel than normal.

Red diesel is typically used in agriculture, and is taxed at just 11.14 pence per litre compared to 57.95 pence per litre for standard diesel, but it is also used to power 90% of all rail freight as well as secondary engines for refrigeration lorries, off-grid heating and construction equipment, meaning companies such as Sainsbury’s, Veolia and JCB have benefitted from the tax break.

The secondary engines are allowed to run on red diesel because they are classed as non-road mobile machinery (NRMM), even though they operate on a truck or trailer.

Emissions from the secondary engine powering are not covered by the Euro standards either and it’s believed they emit up to 93 times more Nitrogen Oxides (NOx) and 165 times more Particular Matter (PM) than the standards for a Euro 6 diesel car.

The diesel, which iscoloured with a red dye to ensure it is not illegally used in road vehicles and it’s estimated that red diesel accounts for 15% of the total use of diesel in the UK.

Campaigners argued that by closing the tax break for NRMM, it would force companies to move towards cleaner alternatives such as liquid nitrogen, biodiesel or electric.

It’s claimed the technology is proven, and last year Dearman partnered with retailer Marks & Spencer, which saw the high street brand lease a zero-emission refrigerated semi-trailer to replace the diesel-powered engine.

Clean air campaigner David Smith told AirQualityNews.com the decision ‘reinforces the opinion that protecting children’s health is not a priority for our government.’

‘These dirty diesel refrigeration engines on supermarket lorries are next to our children as they travel to school, as they wait at bus stops or next to their playgrounds. Where’s their incentive to switch to new and cleaner technology if a “tax loophole” exists to use cheaper red diesel?’ he added.

Failure to take action

A Sainsbury’s refrigerated trailer

The consultation included responses from developers of alternative technology, with the vast majority saying the low cost of running an engine on red diesel was ‘providing a barrier to entry for cleaner technology and fuel.’

One respondent wrote that they were ‘hindered by unfavourable cost comparisons with the artificially low cost of diesel’, meaning they were are unable to compete.

Closing the tax break would also give the UK purse a boost as it would be worth £2.4bn in additional taxation.

Liberal Dem London Assembly Member Caroline Pidgeon told AirQualityNews.com said it was ‘appalling’ that the government decided against closing the tax break.

‘Ending the anomaly of the low taxation of red diesel would immediately send out incentives for new technology to be adopted,’ she said.

‘By their failure to take action the Treasury and Defra are defending a tax break which leads to more polluted air.’

The Freight Transport Association’s head of UK policy Christopher Snelling told AirQualityNews.com they were delighted the government decided not to increase taxes on red diesel for rail haulage and secondary engines, adding that the freight sector should ‘not be discouraged by punitive taxation.’

‘Now the lingering threat of a tax increase has been quashed, businesses within the logistics industry have the certainty and reassurance they need to increase investment in this transport mode and consider long term switching across to rail.’ he added.

‘Cleaner equipment is not more fuel efficient; often it can be less so. Increasing taxes would, therefore, only discourage businesses from switching to more environmentally-friendly equipment.’

The government said that whilst they recognise practical alternatives to red diesel exist they will ‘continue to pursue policies to reduce the overall environmental impact of diesel use’ rather than increase taxation.