Waste sector excluded from the scope of red diesel exceptions
In March HM Revenue & Customs published a policy paper on the reform of red diesel and other rebated fuels entitlement. This paper set out the government’s intention to introduce legislative changes via the Finance Bill 2021 and subsequent secondary legislation to restrict the entitlement to use of red diesel and rebated biofuels from 2022 to specific industries and uses.
Vehicles and machinery used for agriculture, horticulture, fish farming and forestry and passenger, freight or maintenance vehicles which run on rail tracks, will qualify for the lower rate. Fuel used for heating and electricity generation in non-commercial premises and fuel for all marine craft refuelling and operating in the UK, are also qualifying purposes and will subsequently pay the lower rate. Notably, the waste and recycling industry was not determined to be a qualifying industry. The Treasury indicated that waste and recycling was excluded from the scope of the exceptions because it had not found “compelling evidence” that the increased cost of red fuel would have an impact on the cost of recycling.
In its response to the consultation on the proposed reforms, the waste sector had warned that removing red diesel entitlements would increase the cost of recycling and may result in more waste being sent to landfill. The government, however, was unconvinced by these arguments, believing that the benefits of removing the entitlement would outweigh the risks.
Red diesel replacement competition
In view of the waste industry’s concerns over the financial impact of removing the entitlement, the government’s decision to exclude it from the lower rate is disappointing. This has been compounded by the exclusion of the waste and recycling industry from a red diesel replacement competition launched by the Department of Business, Energy & Industrial Strategy (BEIS) on 17th August.
The competition will provide £40 million in grant funding for projects that develop and demonstrate lower carbon, lower cost alternatives to red diesel. However, it is limited to the construction, mining and quarrying sectors. The Resource Management Association Scotland (RMAS) has criticised the government for failing to recognise the issues faced by the waste industry arising from the loss of entitlement and for failing to include it within the scope of the competition.
The Chair of RMAS, Brian Ritchie, has called for the competition to be extended to include the Resource and Waste Management Sector. The viable alternatives to red diesel for the majority of mobile static and process plant equipment, the RMAS has stated, are “extremely limited”. Subsequently the challenge faced by the waste sector in sourcing an alternative to red diesel, is equal to that of other sectors who are able to take part. The RMAS has suggested that including the waste sector within the scope of the competition ensures a level playing field for industries impacted by the changes to entitlement.