Green Car Fuels (Hansard, 3 July 2003)

§ Mr. Jamieson

The Government supports the development and use of transport fuels which offer proven environmental benefits. We do this primarily by means of fuel duty incentives, and, as appropriate, grants to offset the additional cost of alternatively fuelled vehicles. Many alternatively fuelled vehicles also qualify for reduced rates of Vehicle Excise Duty and company car tax.

The Chancellor of the Exchequer takes decisions on fuel duty levels and other transport tax issues on a Budget by Budget basis. In doing so, he takes account of a range of environmental, economic and social considerations, building on the principles set out in the HM Treasury publication "Tax and the environment: using economic instruments" (November 2002).

Budget 2003 announced that a duty incentive of 20 pence per litre for bioethanol would be introduced from 1 January 2005. It also said that the Government was considering how best to give further support to bioethanol produced from ligno-cellulosic feedstocks, and would welcome views on how any such support might be structured.

Budget 2003 also announced that the Government would consult on how best to ensure that future support for road fuel gases (including liquefied petroleum gas (LPG)) continued to reflect environmental and other policy objectives. This consultation was launched on 18 June 2003, and copies of the consultation document have been placed in the House Library. In the light of this, decisions on future duty rates and other forms of support for LPG are due to be announced in the 2003 Pre-Budget Report.

387W

The Government has granted a duty exemption for hydrogen for the purposes of a Green Fuels Challenge pilot project, due to commence later this year. Subject to the outcome of this pilot project, the Government intends to exempt hydrogen from fuel duty for a limited period in the future to encourage further development and early take-up. The taxation of hydrogen as a road fuel raises some complex issues, however, and the Government intends to discuss these issues with stakeholders with a view to taking decisions on the fiscal framework for hydrogen in the future.