Diesel tax loophole 'thwarting' Government's clean air strategy

Government efforts to improve air quality and phase-out the use of diesel vehicles are being undermined by a tax loophole that allows refrigerated lorries to use "red diesel" and pollute the highways.

Red diesel is currently subject to a lower 5% VAT rate compared to standard diesel

Red diesel is currently subject to a lower 5% VAT rate compared to standard diesel

That is the warning issued by clean-tech start-up Dearman, which offers its own zero-emission transport refrigeration system. Dearman claimed that refrigeration units on trucks can use up to 20% of a truck’s fuel, which would result in emission rates six times higher than nitrogen dioxide and 29 times higher than particulate matter from a modern heavy goods vehicle (HGV).

Red diesel is commonly used in agricultural and off-road vehicles. It is illegal to use the fuel to power a vehicle driving on public roads, although retailers and fleet operators can use it to power secondary engines for refrigeration units on trucks. Red diesel is currently subject to a lower 5% VAT rate and is taxed at 10.70 pence per litre compared to 57.95 pence per litre for standard diesel.

In light of recent policy announcements to ban all new petrol and diesel cars and vans from 2040 and create a £255m fund to help councils crack down on emissions under the Air Quality Plan, Dearman believes the tax loophole on red diesel is “thwarting” the agenda.

“Providing a tax break for dirty fuels polluting Britain makes no sense,” Dearman’s chief executive Scott Mac Meekin said. “Any government backing green initiatives must see that artificially lowering the price of dirty fuels makes it harder to develop competitively priced clean power.

“This diesel tax exemption highlights a major lack of clarity from the government. The British public is acutely aware of the dangers of diesel emissions and we are urging the government to take a stronger stance in the fight for cleaner engines.”

The call to address second-engine diesel emissions follows a study conducted by OnePoll, which surveyed 1,000 people – 500 of which were living in London – on public attitudes towards diesel regulations.

The poll found that 62% of Brits want the UK Government to end tax exemptions for diesel fuels used in commercial vehicles, while more than two-thirds of respondents want stronger regulation to promote low-carbon second engines in HGVs.

Although 63% were angered by the poor air quality in their area, only 20% were aware of the tax exemption for secondary engines. Dearman wants the Government to provide clarity on the matter.

Last year, Sainsbury’s commenced a three-month trial of a refrigerated delivery truck cooled by a liquid nitrogen powered engine. Supplied by Dearman and its partners, the truck saved up to 1.6 tonnes of CO2 and 37kg of NOx compared to a similar diesel system. A similar zero-emission engine is also being used in the world's first hybrid bus to run on both liquid nitrogen and diesel.

Lifetime benefits

Dearman’s claims arrive as a new report released by VUB University in Brussels found that electric vehicles (EVs) are much cleaner than diesel or petrol counterparts over a lifecycle assessment, even if they are powered by electricity sourced from fossil fuels.

Compiled on behalf Transport & Environment (T&E), the report noted that EVs in Poland emitted 25% less CO2 over their lifetime compared to traditional vehicles, even though 90% of the country’s electricity is generated through coal use.

"Today an EV driving on Polish electricity - the most carbon intensive in the EU - still has a lower impact on the climate than a new diesel car," T&E’s e-mobility officer Yoann le Petit said. "With the rapid decarbonisation of the EU electricity mix, on average electric vehicles will emit half the CO2 emissions of a diesel car by 2030 including the manufacturing emissions."

Matt Mace


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