Plans to restrict usage of red diesel could have an adverse impact on a wide range of businesses the liquid fuels trade body, The UK and Ireland Fuel Distributors Association (UKIFDA), has warned.
UKIFDA was responding to a government consultation, which closed on 1 October, seeking views on whether the intended removal of the entitlement to use red diesel from April 2022 except in agriculture, rail and non-commercial heating, has overlooked any exceptional reasons why other sectors should be allowed to continue to use red diesel after this date.
Tony Brown, UKIFDA technical manager, commented: “As always, we support tackling climate change and finding ways to meet the UK’s net zero targets.
“The proposal to remove the entitlement to use red diesel from all but a select few sectors in less than two years could have adverse impact on business, the economy and, ultimately, the consumer – after all, new technology may not be fully operational in that time frame.”
UKIFDA believes the changes to the legislation of red diesel could impact not only consumers and fuel distribution suppliers but primary users impacted will include the construction industry, pleasure craft industry, refrigeration transport and users of back-up generators such as hospitals, data centres and schools.
“Curbing the use of red diesel in such a short amount of time would impose immediate additional tax of significant value for many industries – and in industries that are already operating on reduced margins due to Covid-19 restrictions and competition in the markets,” added Tony.
“This would likely result in businesses having to pass the extra costs onto consumers. There would also be cashflow issues for fuel distributors and additional unnecessary and burdensome administration for fuel distributors if the proposals in this consultation come to fruition.
When it comes to the sectors which would still be entitled to use red diesel from April 2022, UKIFDA is largely in agreement.
UKIFDA chief executive Guy Pulham commented: “We lobbied the Government ahead of the Budget 2020 and are pleased agriculture will maintain the current entitlement. We are, however, happy to sit with Government, the NFU and other interested parties, and plan a transition towards low carbon fuel in a time frame that meets net zero and maintains food production too.
“With regard to non-commercial heating being excluded, red diesel has a very limited use for domestic heating and the main fuel used in the UK is kerosene.
“We are, however, against abolishing the tax rebates on heating oil, currently being considered by Government, as any increase in fuel bills will hit the most vulnerable homeowners the hardest. Penalising households with higher energy bills won’t incentivise them to change either.
“Instead, UKIFDA is keen for the Government to consider liquid biofuels as a low carbon alternative to heating oil and urges investment in the UK biofuels sector – industry analysis shows that sustainable, low carbon liquid fuels could be produced in sufficient volume in the UK, and with the added benefit of creating investment and green job opportunities.
“While we are pleased certain sectors have been excluded, especially agriculture, we urge the Government to consider the impact its proposed changes will have on other sectors. For example, hospitals and schools may well have taken advantage of the recent cheaper fuel prices and bought large stocks of red diesel – stocks that could last far beyond the April 2022 deadline and the loss of which would adversely impact those organisations.
“It is for this and many other reasons that a phased approach that incorporates working with UKIFDA and the relevant trade associations in all sectors could lead to the use of low carbon fuel in low carbon technology plant equipment – and in a time frame that suits net zero whilst maintaining industry growth and enterprise, and protects organisations from potentially devastating financial losses.
“April 2022 is a tight deadline given that the high cost of electric vehicles is a barrier to switching to non-diesel vehicles and machinery.”
Tony Brown concluded: “We urge the Government to reconsider its proposed deadline for removing the entitlement to use red diesel except in agriculture, rail and for non-commercial heating.
“We fully support the need to improve air quality and cut carbon emissions but believe the attainment of net zero targets needs a phased approach – one that considers the needs of all sectors as well as consumers.
“We want to work with Government to devise a plan that both removes the entitlement to use red diesel and enables industries to switch to a low carbon alternative as soon as possible – and in a way that supports business.”