Fleet News

Budget 2004: Industry claims victory for LPG

IT was a case of deciding whether the glass was half full or half empty for the alternative fuels industry, as its future for the next three years was laid out in the Budget.

Chancellor of the Exchequer Gordon Brown announced plans to increase fuel duty on liquefied petroleum gas last year, leading to concerns in the fleet industry that its investment in green fuels had been wasted.

But last week's announcement of the rise was not as bad as expected for many. The Government will reduce the duty differential in favour of liquefied petroleum gases by the equivalent of 1p per litre for each of the next three years until 2007.

The rise is equivalent to an increase of 2.42p per litre in 2004/2005.

Currently, the price of LPG is half that of petrol and diesel, so the impact of the duty rises is not expected to be as bad as first predicted when it was thought there would be much larger hike in duty.

A Government spokesman said: 'Thanks to this support the UK now has over 1,400 refuelling sites, servicing more than 100,000 LPG cars nationwide, with sales of road fuel gases growing from 4 million litres to 200 million litres per year since the Government froze duty in the Budget 2001.'

He also pointed out that biodiesel sales have rocketed since the Government introduced a duty incentive in July 2002. From 1 January 2005 duty on bioethanol will be set at 20 pence per litre below the sulphur free duty rate.

The Energy Saving Trust, which recently had to slash grants for fleets wanting to go green, welcomed the Government's announcement as good news for the environment.

Phillip Sellwood, chief executive of the Energy Saving Trust said: 'LPG is a transport fuel with a strong future and this decision demonstrates the Government's commitment to the cleaner fuel and vehicle technology market. We are very pleased that the Government has chosen to continue to support LPG.'

Vauxhall Motors, which has been behind much of the growth in demand for LPG with a wide range of alternative fuel vehicles, said it was 'delighted' with the news. At the LPG Association, which was behind last-minute lobbying to secure the future of the fuel, the mood was buoyant.

A spokesman said: 'This announcement is a clear recognition by the Government that LPG vehicles are the cleanest available on the roads today.'

According to the Green Fuel Company, the UK manufactures six million tonnes of LPG a year and exports about three and a half million tonnes of that. With current UK autogas usage at about 100,000 tonnes, it's clear there is room for growth.

Even sceptical parts of the industry were encouraged by the news, with Glass's Information Services saying there would be no change in residual values for LPG vehicles.

However, the firm pointed out this also reflected its belief the market was unlikely to grow significantly.

Summary

  • Duty on petrol and diesel up by 1.9p a litre from September 1
  • Sulphur-free fuel pegged at 0.5p lower, per litre from September 1
  • Three-year certainty for the duty treatment on alternative fuels
  • 20 pence per litre duty differential in favour of bioethanol and biodiesel, guaranteed until at least 2007
  • Reducing the duty differential in favour of liquefied petroleum gases by the equivalent of 1p per litre for each of the next three years to 2007
  • Rise in LPG duty from September of 2.42 pence per litre
  • Freezing the duty differential in favour of natural gas at its current level (equivalent to 41 pence per litre) to 2007
  • Investigation into use of input-based taxation for biofuels
  • Department for Transport to publish Biofuels Directive consultation paper, including a Biofuels Obligation for the transport sector

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