UK Government signals the end of the road for Red Diesel

Wednesday 3rd March 2021

UK Government has confirmed its decision to remove the entitlement to use red diesel from most sectors, but not all, from April 2022.

These changes will ensure most businesses across the UK will be using diesel fuel taxed at the standard rate for diesel, which more fairly reflects the negative environmental impact of the emissions. However, with agriculture, rail and other non-commercial uses being exempt, without a clear pathway to removing the incentive at a later date, risks encouraging sectors to not consider lower-carbon solutions.

The summary of responses by the Treasury demonstrates the key role LPG can play in displacing higher-carbon solutions, with low-carbon powered machinery, including LPG, being commercially viable but that the red diesel rate disincentivised usage. It also demonstrated that a ‘one size fits all approach’ wouldn’t work, with mains electricity powered alternatives not suitable for all locations.

It builds upon the finds from recent research from Ecuity and Liquid Gas UK on the role for LPG and bioLPG in the UK’s off-grid non domestic sector, which found that LPG and bioLPG could replace one third of all the coal and oil currently used to heat non-domestic buildings as well as for industrial processing, saving 3.5million tones of CO2 – the equivalent of taking over 240,000 cars off the road.

Sophia Haywood, Director of Public Affairs at Liquid Gas UK commented:

By removing the red diesel incentive, it will help the UK tax system incentivise the development and adoption of greener alternatives, such as LPG, however the risk remains that diesel usage remains high, just taxed more, or they switch onto kerosene, which will not see the reduction in emissions behind the ambition. Unless lower carbon, practical solutions like LPG are supported and promoted in public policy, UK Government will struggle to reduce its carbon footprint in these sectors over the next decade.”

For more information, you can view the summary of responses to the consultation here

The trade association for the LPG and bioLPG industry in the UK