Chancellor Urged to Rethink Duty on Biofuels for Home Heating

by Neil Merrett (H&V News) Two leading trade bodies have called for the upcoming Spring Budget to revise charges currently applied for using biofuels in domestic heating that do not apply to fossil-fuel based alternative such as kerosene

Chancellor Jeremy Hunt is being urged to rethink existing tax on renewable liquid fuel in the next Spring Budget to incentivise its use for heating.

Several trade bodies representing the liquid fuel industry have written to the Chancellor to ask him to end a difference in duties charged on biofuels for heating that are not placed on fossil fuel alternatives such as kerosene.

The letter, jointly written by OFTEC and the UK and Ireland Fuel Distributors Association (UKIFDA), said the upcoming budget would be a chance for the government to show support for renewable alternatives to liquid heating fuels, which are currently subject to a 10p per litre charge when used in heat.

As a point of comparison, the letter notes that there is no difference in the duty charged for liquid fuels derived from renewable sources and fossil fuels when used for transportation.

Both trade bodies have called for the government to equalise the charges applied to different liquid fuels for heating as a measure that could benefit rural voters and that would also be potentially cost neutral to implement.

OFTEC chief executive Paul Rose and his UKIFDA counterpart Ken Cronin said in a joint statement that biofuels could play a role as part of a “pragmatic”, multi-technology approach to help decarbonise heating for off-grid homes.

They stated: “Renewable liquid fuels offer an affordable and practical solution for the UK’s 1.7 million oil heated homes to drastically cut their emissions. The chancellor missed the chance to correct the duty disparity when these fuels are used in home heating in his Autumn Statement, and the budget is the last opportunity for the current government to axe this unfair rural tax. It doesn’t make sense for the tax system to penalise the use of low carbon fuel for home heating when kerosene attracts a zero rate.”

The letter from the trade bodies also called for action on an amendment introduced to the government’s Energy Bill before it was passed into law last October.

The push from the trade bodies for supporting the use of biofuels builds on industry-backed trials into using Hydrotreated Vegetable Oil (HVO) to heat homes.

Around 150 UK buildings are currently using HVO as part of the trials to look at the case for expanding use of the fuel in off-grid homes.

OFTEC and the UK and Ireland Fuel Distributors Association (UKIFDA) said that it was possible to convert existing oil boilers to use the fuel as a replacement for fossil fuel solutions such as kerosene for £500. They argued that the conversion could allow homes to use a fuel that cut emissions by up to 88 per cent compared to kerosene at a lower upfront cost that installing heat pump. READ MORE