Red diesel tax ‘will add to council waste bills’

Joseph Doherty claimed the proposal will add an extra £200,000 per annum cost to the Northern Irish recycling company’s fuel bill.

Mr Doherty said: “As we transition to the new rules, these increased fuel costs will ultimately have to be passed to customers in the short term, doubling the cost per tonne of waste to £1.

“Fortunately, we are already making efforts to adopt cleaner, greener technologies within the plant, so that we can absorb these costs in the longer term.

“However, this may take longer than two years to implement and the new technology may not be fully operational in that time frame.

“We can’t argue with the motivation behind removing the entitlement to use red diesel; the desire to tackle climate change, ensure that businesses pay fairly for the harmful emissions they produce and incentivising them to improve their energy efficiency, is something every government must do.”

Chancellor Rishi Sunak announced plans in his March budget to remove tax relief on the use of red diesel in most industries (see letsrecycle.com story).

Red diesel

Red diesel is the term used for gas oil intended for use other than as fuel in road vehicles, so called because since 1961 there has been a requirement for it to be marked with a red dye and chemical markers. This is to prevent its misuse in road vehicles.

The Treasury says red diesel accounts for 15% of total diesel use in the UK.

The government has acknowledged changes to the tax treatment of red diesel will affect local councils and has vowed to engage with them as part of the red diesel consultation, which closes on 1 October 2020. The consultation can be seen here.

It is estimated the increase of fuel duty on red diesel could raise an extra £2.4 billion in taxes annually.

Alternatives

Mr Doherty says the changes to the tax treatment of red diesel will result in increased fuel costs of 237% at Newry-based Re-Gen Waste, going from a red diesel duty rate of 11.14 pence per litre to a white diesel duty rate of 57.95.

He said: “In the run up to 2022, businesses such as ours are totalling up the cost of what removing the entitlement to use red diesel, will actually look like.

“In some instances, red diesel users are saying that there are no commercially viable alternative fuels they can use, and others say that the cost of using cleaner technologies is a barrier to switching to non-diesel-powered vehicles and machinery.

“From Re-Gen’s perspective, we are already committed to a cleaner future and plans are already in place to begin the incremental shift to using greener technology, including introducing two electric powered cranes this year, with a further two in 2021 and gas-powered fork-lifts and trucks.

“While we are reassured that we have two years to make the shift over to red diesel alternatives, we would have been happier with a staged approach over a longer term, in order to transition to the new rules comfortably.

“Right now, we are looking into readily available, low carbon, alternative sources of energy such as using gas from anaerobic digestion plants.

“We are also exploring environmentally friendly, second generation biofuels such as hydrogenated vegetable oil which are compatible with existing diesel engines and equipment.”