Call for chancellor to correct disparity on duty between renewable liquid fuels and fossil fuels when used for home heating

The Chancellor is being urged to show he is on the side of off-grid homes and businesses by equalising the duty on renewable liquid fuels with that of kerosene when used for home heating in his upcoming Autumn Statement (22 Nov) to align with the equal treatment of the fuels when used in
transportation.

Trade associations OFTEC and UKIFDA have written to the Chancellor to highlight how the disparity in the existing duties on renewable liquid fuels and kerosene when used for home heating are counterintuitive and a significant barrier to wider take up. In comparison, renewable liquid fuels and fossil fuels attract the same duty when used in transportation.

Currently no duty is applied to kerosene for heating use but renewable liquid fuels for heating use are subject to an additional c10p per litre.

The Government’s amendment to the Energy Bill committed to a consultation on a Renewable Liquid
Heating Fuel Obligation (RLHFO) within one year from the Bill receiving royal ascent. OFTEC and UKIFDA have submitted proposals to the Treasury to demonstrate how equalising the duties would be a cost neutral measure and require no subsidy.

Over the past two years, around 150 properties have switched to the renewable liquid fuel Hydrotreated Vegetable Oil (HVO) as part of an industry funded demonstration. HVO is manufactured from waste cooking oil and feedstocks, meets exacting British Standards on sustainability and offers a carbon reduction of 88% compared to fossil fuel heating oil.

It costs less than £500 to convert an existing boiler to run on HVO and can be completed as part of an annual boiler service. In comparison, according to the government’s online calculator, the typical cost for off-gird homes to install a heat pump is £10,000 to £30,000. This is due to the additional changes needed
for the technology to work effectively.

OFTEC CEO Paul Rose and UKIFDA CEO Ken Cronin commented: “Our demonstration project shows that renewable liquid fuels can achieve the objectives set out by the Prime Minister, by providing a fair choice to consumers across rural constituencies and deliver an easy, cheap and non-disruptive way to  decarbonise their heating.

“When used in transportation, renewable liquid fuels and fossil fuels attract the same level of duty. However, there is currently a disparity when the fuels are used for home heating. It cannot be right that the tax system currently penalises the use of low carbon renewable liquid fuels for home heating, while kerosene attracts a zero rate.

“This is a major, and counterintuitive, barrier to the take up of these fuels, which are proven to reduce emissions by almost 90% and would lead to greater carbon reductions within current Carbon Budgets.

“Crucially, equalising the duties, would be cost neutral for the Government, require no subsidy and could be done through regulations. We are therefore urging the Chancellor to equalise the duty on renewable liquid fuels for home heating in the upcoming Autumn Statement and support a pragmatic solution to decarbonise the off-grid sector.”