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Biofuel tax shock revealed at Live

Date: 01 October 2007   |   Author: Nick Gibbs

The Government has given its clearest message yet that it won't use tax breaks to encourage the use of biofuels as it did with LPG and CNG, dashing the hopes of car makers pushing bio-fuel cars.

Speaking at last week's BusinessCar Live event, Department for Transport manager and clean fuels advisor Malcolm Fendick told assembled fleet managers not to expect a duty cut or tax breaks in the next budget. "I was involved in the thinking on policy for biofuels and we decided that greater and greater tax breaks are not the way to go," he said.

Duty on biofuels is currently set at 20ppl below regular petrol and diesel, but at pump bioethanol's only a couple of pence less per litre than unleaded at the few forecourts that sell it.

"E85 is a niche product," Fendick said bluntly of the 85% blend used by Saab Biopower and Ford Flexifuel cars, among others. "It means a new fuel distribution network, for one thing."

The Government has two main concerns about offering tax breaks - falling tax revenues and ballooning fuel imports if it becomes popular. The DfT's preferred solution is to force the oil firms to blend biofuels into regular fuels, up to 5% by 2010, so creating a stable biofuel market.

When it comes to cutting emissions, current DfT thinking is not to favour one eco solution over another. "I'm a firm advocate of being technology and fuel neutral," said Fendick.

Asked for a reaction, MD of Saab GB Jonathan Nash said: "We believe that there should be a clear and defined policy that stimulates supply and demand for high-blend biofuels in the UK. We look forward to any fiscal incentives that may be announced in the Pre-Budget Report later this year.