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Mineralogical firm calls Government tax on waste oil "bizarre"

A minerals manufacturer has called the current tax on the use of waste oil bizarre and believes the Government is actually incentivising the use of virgin fossil fuels rather than re-use fuels.

The firm, which does not want to be named, asserts that it cannot use fuel derived from waste oil because it is not economically viable since the Government started taxing it in November 2008. Having recently invested £1.1 million making its plant compliant to burn the fuel under the waste incineration directive (WID), the firm is now using natural gas to power its plant as a cheaper alternative.

WID compliant plants produce minimal emissions, which are constantly monitored, making it an environmentally friendly way to burn fuel.

It is currently lobbying Government to remove or at least significantly lower the duty currently charged on recovered fuel oil (RFO) used in WID compliant plants in the mineralogical industry and has seen 55 MPs sign an early day motion raised to highlight the case.

A spokesperson said: I would say we made an investment in the plant in the long term. But we havent been able to make it pay back. The savings we hoped to gain have not been realised because we cannot use the oil. If we turned the clocks back we wouldnt have invested in making the plant WID compliant.

Using RFO is more environmentally beneficial than fossil fuels like gas. However, RFO currently has a 10.37p duty per litre, making it more expensive to burn than fossil fuels. Additionally, European counterparts pay less than €15 duty per tonne of oil, while UK industry faces a €130 duty per tonne. The minerals firm, which specialises in the lime industry, is therefore concerned that this would affect competition in the industry.

An HM Treasury spokesman said: "The UK has to charge duty on waste oil under the EU Energy Products Directive. The level of duty must be the same as the rate on the fuel for which the waste oil is substituting. In the UK this is fuel oil, whose duty rate is 10.37ppl - the lowest rate of fuel duty on any fuel in the UK."

Furthermore, the Department for Environment, Food and Rural Affairs believes that by tax on burning RFO incentivises regeneration of the fuel, which is a preferred use as it is higher up the waste hierarchy.

Additionally, data from local authorities and the Environment Agency obtained via the Freedom of Information Act shows an increase of 690 instances of illegal waste disposal in 2009 compared to the 1479 figure for 2008. The firm believes the increase could be a result of the tax introduction although Defra denies this.

The firm intends to continue engaging with Government to find the best solution for industry and the environment.

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