New red diesel rules come into force on 1st April as construction and building firms are calling for a 12-month delay
FROM next month the law around the use of diesel in some vehicles and machinery will change.
The new rules, being imposed by the government, will affect machines, appliances, and industries up and down the country which use the often cheaper fuel. Here's what's happening:
What is red diesel?
Red diesel, also commonly called gas oil, is known as a rebated fuel. It is normally much cheaper than the regular white diesel motorists uses at petrol stations because it is taxed at a significantly lower rate.
The fuel used in diesel road engines has a duty rate of 57.95 pence per litre while red diesel is entitled to a rebate of 46.81ppl giving an effective rate of 11.14ppl.
The diesel is blended with a red dye to differentiate it with the more standard diesel our cars use and it is mostly used in off-road machinery and engines such as diggers, tipper trucks or generators. It is also used by ships, boats and barges and by the railways to power vehicles such as freight trains.
It is illegal to use it in vehicles on public roads but there are some exceptions. If it were to be used to power the gritting machines treating surfaces or those which may be cutting the vegetation and hedges of verges on a country lane.
But many industries rely on red diesel to run their machinery and appliances and therefore their companies. Farming, agriculture and construction are among the sectors that are big users of red diesel and these turn to specialist fuel suppliers to legally purchase their red diesel.
When and why are the rules changing
The rules surrounding the use of red diesel, and other rebated bio fuels, change on 1st April. The plans were first outlined during the 2020 budget.
With climate change and reducing the UK's harmful greenhouse gas emissions among the government's big targets, with an ambitious plan to make the country carbon neutral by 2050, it has taken the decision to restrict the numbers of sectors and industries that will be able to have access to red diesel from the start of next month.
According to Nationwide Fuels, red diesel is responsible for 14 million tonnes of CO2 released every year.
Alongside making allowances for the disruption caused by the pandemic, ministers have given businesses around two years notice to allow them to have the time to prepare for the switch to a new fuel type.
Other policies have also changed in recent years as part of efforts to drive down emissions figures – most recently the change from E5 to E10 petrol for car drivers.
After 1st April no one will be able to put red diesel into a tank that cannot legally use it, even if it is stock that has already been purchased. Instead firms are being advised by HMRC to run down supplies as best they can ahead of the date change and then safely dispose, sell or transfer any remaining red fuel they may have left.
Who will be most affected?
After 1st April the use of red diesel is going to be limited to a very small number of industries.
Those still able to legally purchase the rebated fuel will be companies working in agriculture, forestry, horticulture and fish farming alongside the rail industry serving passengers and freight.
There are also going to be exemptions for powering non-commercial heating systems such as those in homes, on narrowboats or house boats and in religious buildings. But most other sectors, particularly firms working in construction relying on machinery like diggers and cranes, or those with commercial buildings or generators that use gas oil, will need to find an alternative.
The Road Haulage Association and numerous construction groups are among those in recent weeks to have called on the government to delay the ban for another year. They say that firms are struggling enough with higher fuel prices, wage bills and and energy costs and to further increase the costs for companies is an added pressure when times are already extremely tough.
Richard Beresford, chief executive of the National Federation of Builders (NFB), said: "The development of electric plant machinery and alternative fuels was hit by Covid-19 lockdowns, so it was already tough to move from red diesel but a 190 percent increase on pre-pandemic fuel prices makes it unbearable for many businesses."
While Brian Berry, chief executive of the Federation of Master Builders (FMB), explained that the ongoing war in Ukraine was now makings things even worse.
He explained: “Unprecedented global events, not least the consequences of the Russian invasion of Ukraine, make this the worse time to pile yet more financial pressure on small builders with the ending of the red diesel rebate.
"The FMB fully supports the shift to greener alternatives to diesel for use by the construction sector, but progress towards these has been too slow and ending the rebate now risks the viability of local, community-based builders already hit by 18 months of spiraling product prices.”
What are the alternative options to red diesel?
Red diesel accounts for around 15% of the diesel used in the UK and because the government wants to see these companies adopt a fuel that is kinder to the environment and reduce the amount of harmful gas being pumped into the atmosphere they will be left with a few options.
Affected industries and companies can switch their vehicles to white diesel, which is also a duty paying fuel, or a renewable diesel alternative such as HVO or Hydrotreated Vegetable Oil. Alternatively like many domestic car drivers purchasing EV cars in greater numbers, they could explore the potential for electrifying their operations too.
The additional duty which is raised by those who switch from red to the more tax-heavy white diesel will be reinvested into green initiatives says the government.
But some are already making the switch ahead of the April 1 deadline.
Like the cost of other diesels, petrol and heating oil, prices for red diesel have risen significantly in recent weeks with one fisherman claiming it is currently cheaper for him to lift his boat from the water and fill it with white diesel at the local petrol station than it is to pay the price of a private delivery of red diesel.