Select Committee on Environmental Audit Appendices to the Minutes of Evidence


APPENDIX 5

Memorandum from Calor Gas

SUSTAINING THE MOVE IN TAXATION FROM ENVIRONMENTAL GOODS TO BADS

SUMMARY

  1.  At first sight it may seem that lower fuel prices are incompatible with the Government's stated commitments to reduce pollution and fulfil its commitments to the Kyoto greenhouse gas targets. In fact, lower duty rates targeted at road fuel gases in such a way as to create a significant, self-sustaining market for them would contribute significantly towards the Government's environmental objectives rather than detract from them. When this measure is combined with other fiscal incentives for the road fuel gas industry, proposals for which are outlined in this document, the commercial benefits to transport providers would encourage a rapid and extensive up-take on gas powered vehicles for the benefit of the UK's commerce, industry and environment.

  2.  In recent years, Budget after Budget has introduced modest incentives to encourage the use of liquefied petroleum gas (LPG) as an environmentally-friendly motor fuel. Gradually, fleet operators and owner-drivers are beginning to respond to these price signals. Some 16,000 LPG vehicles are expected to be sold this year, and there are some 500 refuelling points around the country. The UK LPG industry estimates that there could be over 250,000 LPG vehicles on the road over the next few years—given the right policies.

  3.  A big shift to use of LPG vehicles could mean significant improvements for the environment and human health:

    —  Lower emissions of dangerous carcinogens.

    —  Lower emissions of particulates.

    —  Lower emissions of oxides of nitrogen and carbon monoxide.

    —  Lower emissions of ozone precursors.

    —  Lower emissions of greenhouse gases.

    —  Lower emissions of acid gases with less damage to crops, buildings and our cardiovascular systems.

    —  Lower incidence of hospital admissions and premature death.

    —  Less engine noise.

  4.  We are aware that there have been widespread demands for easing of the tax burden on the motorist and hauliers. We are writing to you to request that if there is to be any relief a significant part of it should be reserved to providing incentives for people to switch to LPG usage. This is a summary of our proposals:

(i)  Reduce the duty on LPG to the EU minimum

  5.  The Lords Select Committee on Science and Technology (Nov 1996, para 4.18) recommended a duty reduction to the EU minimum (currently 6p/kg [=0.1 Euro/Kg] cf the actual rate levied of 15p/kg). The abolition of the fuel duty escalator adds to the case for duty on LPG to be reduced to the EU minimum so that progress towards green objectives is maintained. This move would give a welcome signal, especially to vehicle fleet managers. Assurances about the maintenance of any differential favourable to LPG (ideally about its duty remaining at the EU minimum for a reasonable planning period) should be reaffirmed with a longer time perspective.

(ii)  Provide capital allowances for the conversion of vehicles to run on LPG and for the installation of LPG refuelling points

  6.  We propose writing-down allowances of 100 per cent (rather than the standard 25 per cent) for commercial operators on the cost of converting cars, taxis, vans, and buses to run on LPG in the year of conversion; and, for garage owners installing LPG refuelling points. Since the market for LPG remains modest at present the notional loss to the Exchequer would be small. The concession would represent the acceleration of relief that would in any case be given over the following years.

(iii)  Appropriate VED/Company Car Concessions for LPG powered vehicles

  7.  The Finance Act (No 2) in 1998 made provision for vehicles certificated as producing lower pollution to bear lower VED—This concession applies to new LPG vehicles provided directly from the manufacturer. Cars, taxis, buses, lorries and vans that have been converted to run on LPG should also be able obtain batch certification rather than have to seek individual certification (note that most LPG vehicles are currently converted rather than bi-fuel from new). The administration of this could be simplified by applying the concession to vehicles on the Powershift register. Recognition should also be given through the VED system to vehicles which produce lower emission profiles of pollutants other than CO2. This would help integrate the Government's climate change policy and its AQS. We would also propose that a 6 per cent discount be applied to company car driver's car benefit charge for good quality LPG vehicles. This will have the effect of incentivising directly the driver—increasingly responsible for vehicle selection—for choosing an environmentally sensitive company car.

(iv)  Boost the Powershift Programme

  8.  The Powershift programme operated by the Energy Savings Trust (EST) currently receives some £16m from the DETR. It has made a massive contribution to advancing fuel technologies and the use of cleaner, alternative fuels. There is a strong general argument for raising Powershift's funding significantly to undertake initiatives of this nature.

  9.  The Automotive liquefied petroleum gas (LPG) industry in the UK includes major fuel suppliers, such as Calor Gas, market leading vehicle manufacturers, a nationwide network of professional vehicle converters and a growing number of businesses who have made a commitment to run their vehicle fleets on LPG. They all stand ready to help deliver the cleaner vehicles of the future; current policies do not make the best of their potential. We are requesting for the Budget to include our proposals thereby unlocking that potential.


 
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