HM Treasury News Release 26 November 1996
162/96 HMT 5
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NEW MEASURES TO IMPROVE AIR QUALITY
A package of measures to promote the use of cleaner fuels and
technologies to help improve air quality, has been announced
by Chancellor Kenneth Clarke today.
Changes in today's Budget will make it easier to change to
environmentally friendly options by encouraging availability
of cleaner ultra low sulphur diesel and further reducing
duties on environmentally friendly road fuel gases to help
cover conversion costs. Owners of lorries with cleaner
exhausts can look forward to reduced vehicle excise duty. To
encourage fuel efficiency and reduce emissions of "greenhouse
gases", duty on all types of petrol, diesel, and gas oil and
fuel oil is to be increased.
These measures will help emissions of particulate and other
pollutants to fall dramatically over the next 10 years -
towards the Government's draft National Air Quality targets
for 2005.
Commenting on this package, Exchequer Secretary Phillip
Oppenheim said:
"The quality of the air we breathe will be improved by
this package. We are fighting the war on pollution
through increasing duty on dirtier fuels and rewarding
the use of cleaner fuels by cutting duty on ultra low
sulphur diesel, road fuel gases and bringing down the
vehicle excise duty on lorries that have clean exhausts."
DETAILS
These measures should help to reduce emissions, notably of
particulates, which have been the focus of increased concern
in recent years as new evidence of their health effects has
emerged, linking them with illnesses, such as asthma.
Department of Health assessments suggest that particulates are
responsible for several thousand advanced deaths each year,
for substantial numbers - of the order of 10-20,000 - of
hospital admissions, and for many thousands of instances of
illness and reduced activity.
The tax reductions are:
* a cut in duty on ultra low sulphur diesel of 1 pence per
litre (5 pence per gallon) relative to standard diesel,
coming into effect as soon as possible after May 1997.
This should promote the availability of ultra low sulphur
diesel, and allow its pump price to move towards that of
standard diesel. Use of ultra low sulphur diesel
produces lower levels of pollutants than standard diesel.
Typically, it cuts up to 30% of a vehicle's particulate
emissions.
* a cut of 25% in duty on road fuel gases (liquefied
petroleum gas and compressed natural gas), from 6pm on
Budget day. This amounts to a tax reduction of 8 pence
per kilogram. After last year's 15% cut, this reduction
will encourage even more gas use, recognising that there
are extra costs of conversion to gas power. Vehicles
using road fuel gases emit very much lower levels of
particulates and most other major pollutants than petrol
and diesel vehicles.
* a cut in vehicle excise duty (VED) by up to 500 Pounds
for lorries producing very low particulate emissions.
The aim is to encourage lorry owners to fit "particulate
traps" or, for smaller lorries, to convert to gas power.
When used with ultra low sulphur diesel, a "particulate
trap" can reduce a vehicle's emissions by up to 90%. The
Government will be issuing a consultation document on the
technical details of this change. This cut takes effect
from early 1998.
To encourage continued improvements in fuel efficiency and to
help reduce emissions of carbon dioxide and other "greenhouse"
gases the Government is,
* from 6pm today, increasing the tax on all types of petrol
and diesel by 3 pence per litre (14 pence per gallon),
including VAT, and
* from 6pm today, increasing the duty on gas oil by 0.17
pence per litre (0.77 pence per gallon),and the duty on
fuel oil by 0.13 pence per litre (0.59 pence per gallon),
both excluding VAT.
These measures reflect a number of factors, including the
Chancellor's commitment to increases in petrol and diesel
duties of an average of at least 5% per year in real terms, in
order to promote reductions in emissions of "greenhouse"
gases.
Emissions of many pollutants are already falling, with
additional dramatic reductions expected over the next few
years. The measures announced today will secure further
improvements in air quality.
NOTES FOR EDITORS
1. Details of fuel duty changes can be found in Customs &
Excise Press Notice No.22. Details of changes in vehicle
excise duty can be found in Department of Transport Press
Notice No. MISC 1.
2. Only last week the House of Lords Select Committee on
Science and Technology suggested a number of tax changes
to help reduce vehicle emissions. Today's measures
deliver substantially on their recommendations.
3. Ultra low sulphur diesel is diesel with a sulphur content
of less than 50 parts per million (by weight). When used
in an ordinary diesel vehicle, it can produce reductions
in particulate emissions, typically of up to 30%. When
used in conjunction with a "particulate trap", the
reduction in particulate emissions can rise to 90%.
4. Before tax, ultra low sulphur diesel is more expensive
than ordinary diesel. Although the tax on ultra low
sulphur diesel will rise with other diesel at 6pm on
Budget day, the proposed measure to reduce the duty as
soon as possible after May will create a 1p per litre
duty differential in favour of ultra low sulphur diesel,
which should allow equalisation of the pump price with
standard diesel.
5. Road fuel gases - liquefied petroleum gas and compressed
natural gas - are more expensive than petrol and diesel,
chiefly because of the cost of compressing the gases for
on-board storage. Their excise duty was reduced by 15%
in the 1995 Budget, to bring the price of the fuel
broadly into line with petrol and diesel. It is cut by a
further 25% this year to allow for conversion costs: the
proposed measure provides a substantial contribution to,
and in some cases should cover, the conversion cost for
high mileage vehicles such as taxis and delivery vans.
If the use of road fuel gases expands, those conversion
costs can be expected to fall. Vehicles using road fuel
gases emit significantly fewer pollutants than petrol and
diesel vehicles.
6. In the 1995 Budget, the Chancellor announced his
intention to keep under review the options for using the
vehicle excise duty (VED) system to promote low emissions
vehicles. The Government has decided to introduce a VED
incentive of up to 500 Pounds per year for lorries which
meet a low emissions standard. Using an incentive to
promote clean lorries, rather than regulations or
increased taxes for dirty ones, helps the environment
without penalising industry. The incentive will be
introduced in early 1998 following a consultative paper
on the technical details of implementation of the
measure.
7. The VED incentive should promote the fitting of
"particulate traps"for new lorries, and retrofitting for
older lorries, or, for smaller lorries, conversion to gas
power. "Particulate traps" are a kind of filter which
reduce harmful emissions of particulates from diesel
vehicles. Many particulate trap systems incorporate a
catalyst which allows for continuous regeneration of the
system without the need for cleaning. The best of the
current traps can reduce particulate emissions by up to
90% when used in conjunction with ultra low sulphur
diesel. They cost around 2500-4000 Pounds, so the VED
incentive will contribute substantially to this cost over
the life of the trap. Furthermore, the costs are likely
to fall as technology develops and volumes increase.
8. Levels of many emissions are already falling, or are set
to fall over the next few years. This reflects factors
such as the spread of catalytic convertors, and tighter
standards for fuel and vehicle emissions.
9. If you have access to the Internet you can find this
information at "http://www.hm-treasury.gov.uk". Other
Treasury material can also be found at this address.