Pre-Budget Report: Chancellor emphasises role of international emissions trading
Mon 12 June 2006
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The 2006 Pre-Budget Report highlights the development of a global carbon market and further steps towards carbon capture and storage as priority areas for reducing CO2 emissions and mitigating climate change. The Chancellor also announced some transport tax changes, presented as environmental measures.
The main measures included:
* An inflation-based rise in fuel duties of 1.25 pence per litre
* A rise in duty on LPG, equivalent to 2.25 pence per litre in total, to reduce the duty differential in its favour, in line with a commitment made earlier (The CNG duty differential did not change.)
* A package of measures to encourage the development of the biofuels market:
- A reduction in duty to 7.69ppl for biofuels used in off-road pilot schemes, including rail.
- An amendment of the definition of biodiesel to include a new second generation biodiesel that is capable of being blended at mixtures in excess of 5%.
* There were no changes in VED rates for higher, or lower, carbon vehicles despite prior media speculation that these were likely
The Treasury said that the Government will continue to 'consider the case for improving VED incentives for fuel efficient vehicles', whilst pointing to the fact that DFT's communications campaign - to be launched on January 30th, 2007 - will encourage people to purchase 'greener' cars.
The Chancellor also announced that the Government will consider the case for an incentive in company car tax to support the take-up of flex-fuel E85 vehicles.
On biofuels, the Treasury document notes that DfT intends to consult further on key aspects of the RTFO early in 2007, including the role high-blend biofuels could play in meeting RTFO targets. It also notes that work is under way, led by the LowCVP, to develop carbon and sustainability assurance schemes for biofuels.
Responding to the PBR, the Society of Motor Manufacturers and Traders (SMMT) welcomed the fact that the Chancellor "avoided the temptation to tinker with vehicle excise duty".
The SMMT said that the Treasury must recognise the significant CO2-based taxes already levied on motorists and commercial vehicle operators through fuel duty, VED and company car tax.
According to the SMMT's press release, however, "the industry is disappointed that the Chancellor, once again, missed opportunities to widen incentives for the take up of cleaner vehicles".
Transport 2000 welcomed the PBR announcement of increases in duties on petrol and flying, but called for renewed investment in alternatives. It also condemned the absence of any measure to encourage more fuel-efficient vehicles.
The transport campaign organisation said that the tax changes on motoring are not enough to bring the true cost of motoring up to realistic levels. A spokesman said: “Since 2000 when fuel duty was first frozen, the real cost of motoring has fallen while public transport fares have continued to rise...there is much further to go.”
Related Links
Treasury website - PBR download section
SMMT press release link
Transport 2000 press release (follow news link)
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