The controversial repeal of a Government biodiesel subsidy has been halted for sustainably sourced fuel.
The 20p tax differential for all biodiesel was due to end in April, but tax support for sustainably sourced cooking oil biofuels has been extended for another two years, following an announcement in the 2009 pre-budget report.
UK Sustainable Bio-diesel Alliance (UKSBA) director Tracey O’Keefe told MRW: “It’s been passed into law, the only remaining query is if that holds – it’s not guaranteed.”
O’Keefe also said she would “be surprised” if the incoming Government repealed the exemption, adding: “The issue is where to go in the longer term as the Government is reluctant to support developments through the tax system.”
Instead, the Government plans to generate demand for biofuels using the Renewable Transport Fuel Obligation (RTFO), which states that all fossil fuel must contain a minimum of 5% biodiesel – a target which large producers such as Shell and BP currently meet.
O’Keefe called for a “smooth curve” transition from one system to the other, explaining: “You can’t remove tax support until legislation [for RTFO] is sorted out.”
The tax relief has allowed several commercial companies to run their fleets on biodiesel fuel blends of between 20%-100%, including Morrisons, McDonald’s and 3663 First for Foodservice.
O’Keefe said: “It would not have been possible for fleets to continue with a 100% blend if they experienced a 20% rise. Green fuels are expensive relative to fossil fuels – you don’t convert to green energy to save money.”