Trade associations in the waste sector have expressed concerns about the timing of Treasury plans to remove industry’s eligibility to use red diesel, with many even likening the reforms to a ‘stealth tax’.
In 2020 the government announced it would reduce the list of companies allowed to use red diesel, which many operators use to power machinery, from April 2022.
HMRC explained that the tax changes would ensure that most users would use fuel taxed at the standard rate for diesel from April 2022, “like motorists, which more fairly reflects the detrimental impact of emissions they produce”. Removing most red diesel duties will also help ensure that the tax system incentivizes users of polluting fuels like diesel to improve the fuel efficiency of their vehicles and machinery, invest in cleaner alternatives or simply use less fuel.
A Treasury spokesman said letrecycle.com: “Our changes to red diesel duty, set out in the 2020 budget, will mean that from April most current users of red diesel in the UK will have to use diesel taxed at the standard fuel duty rate , like motorists, more fairly reflecting the harmful impact of the emissions they produce.
Alternatives
One of the major concerns in the waste sector is how quickly alternative electrical equipment and more efficient diesel machinery can be developed. And, there are caveats that costs will be passed on to customers.
UROC, a trade body representing independent waste management companies and SMEs, said letrecycle.com that he was liaising with other business associations to send a co-signed letter to the Treasury and ministers urging them to roll out the reforms in a “staged approach”.
However, the Environmental Services Association (ESA), the trade association representing the private waste sector, said it was “optimistic” that alternatives would appear on the market in the next few years.
Waste sector protests have so far fallen on deaf ears, with the Treasury insisting it has not found ‘compelling evidence’ that removing the lower red diesel rate would increase the cost of recycling (see letrecycle.com story).
Waste Management
There are a diversity of views in the industry on the impact of ending the red diesel tax reduction.
A waste management company said letrecycle.com that this would increase the cost of operating vehicles at transfer stations in particular, while the impact on customers was highlighted by FCC Environment.
A company spokesperson said while FCC was “well positioned” to deal with the reforms, the removal of the reduced fuel tax rate would result in higher end-customer prices.
They added: “Without pressure on factory manufacturers to design alternative fuel vehicles that meet the needs of our sector, we will not be able to drive the shift to alternative fuels that this subsidy removal seeks to effect because there simply aren’t alternative fuel vehicles. on the market.”
Several power plant trials are underway in the industry, and some companies have been using power grabs for some time.
However, there are not yet similar alternatives for equipment such as landfill compactors, bulldozers and excavators, warn some in the industry.
Specialty vehicles and applications
And, despite optimism about future alternatives, Jacob Hayler, ESA’s executive director, said his association had expressed concerns during the Treasury’s public consultation that the reforms would only increase costs and would not would not lead to a shift from fossil fuel sources to specialized vehicles. and applications that use red diesel.
He said: “These include the types of mobile plant found at transfer stations and waste treatment sites, as well as standby generators and start-up fuel for the energy of waste treatment plants. waste.”
Mr Hayler added: “Decarbonising these vehicles and applications is a challenge and will not be driven by the economics of this tax change alone, but we are optimistic that, through collaboration between operators and vehicle suppliers , through R&D with trials largely facilitated by our members, and through new sourcing policy drivers, we will begin to see viable solutions come to market over the next few years, helping to continue the goal net zero by our sector by 2040.”
ESA has worked with HMRC to develop practical guidance for operators ahead of the transition in April.
Letter
Leading the resistance to change, Jenny Watts, chief executive of UROC, said letrecycle.com that her organization’s co-signed letter to the Treasury was a “last ditch attempt” to get the government to understand the importance of the reforms, which she said could be the “final nail in the coffin” for many businesses.
Ms Watts said the approach suggested by her organization was a phased implementation over several years.
“As we’ve seen with the landfill tax, having a financial engine to drive change can and does work, but it should be a gradual process with incremental increases from year to year, similarly to the landfill tax was introduced,” she said.
She added: “When the red diesel changes were first announced, it was in the April 2020 budget. We are now in a completely different economic climate, and that could be disastrous for many operators of waste and resources and lead to unintended consequences that actually impact the environment, such as increased fly tipping and reduced recycling.
It’s actually a stealth tax in its current form.
- Jenny Watts, Executive Director of UROC
“We are not against the environmental benchmarks of removing the lower rate, but it is effectively a stealth tax in its current form, the reality being that in the absence of realistic alternatives currently available, the same amount of diesel will still have to be used for the foreseeable future, to the detriment of businesses, jobs and moving up the waste hierarchy.
“Stealth Tax”
The British Metals Recycling Association (BMRA) is another trade body that has described the reforms as a “stealth tax”.
The BMRA has calculated that losing the sector’s right to use red diesel will cost its members between £50,000 and £1.2 million, depending on the size of the companies and the number of sites they operate.
Antonia Grey, head of policy and public affairs at BMRA, said letrecycle.com that his association had told the Treasury “repeatedly” that the removal of the duty amounted to a stealth tax.
She said: “The Treasury’s insistence that this decision is intended to incentivize a switch to ‘cleaner alternatives’ is illogical given that there is no such thing as a factory powered by cleaner alternatives, so the sector will continue to use regular diesel.
“Even if there were sufficiently robust alternatives, around 30% of members are neither connected to the national grid nor can they draw enough power from it.”
Ms Gray said the BMRA would continue to press the government for an extension.
Hourly
The Vehicle Recyclers Association (VRA) has also expressed concerns about the timing of the reforms, suggesting that it might be “prudent” to show more flexibility by delaying the measure for another 12 months or by ” softening the blow” with concessions in other areas. .
However, the VRA said it supported the government’s commitment to reducing carbon emissions, improving air quality and tackling the “illegitimate” use of red diesel while trying to “rebalance the accounts “.
Chas Ambrose, the secretary of the VRA, said letrecycle.com“Electrification in the waste industry is still in its infancy and in many cases cost-effective alternatives, particularly to off-road diesel plants, are not available.
“Forcing the waste industry to use ‘white’ diesel will simply put many businesses under additional pressure and will of course ultimately mean that increased costs will simply be passed on to customers, customers and the public.”
Five-year transition period
The Wood Recyclers Association (WRA) said it called for a five-year phase-in when the Treasury consulted on the reforms.
Wood recyclers often power machines such as wood chippers with red diesel, and businesses are often located in rural areas with less access to electricity.
Although it said no one could dispute the “logic” behind the plans, the WRA said the reforms had come at a “terrible time” with businesses battling inflation and other rising costs.
Julia Turner, Executive Director of the WRA, said letrecycle.com“Our members are trying to prepare for this, and we are supporting them in the search for alternative fuels and equipment developments.
It’s completely the wrong time for this to come into force and it could jeopardize businesses in our sector
- Julia Turner, Executive Director of the WRA
“However, the lack of realistic alternatives, as well as some of our member sites being located in places where access to electricity is simply not possible as well as inflated energy costs, of labor and transport, mean that now is really not the right time for this to come into force and could jeopardize businesses in our sector.
Ms Turner urged the Treasury to reconsider its belief that there was no evidence the reforms would have an impact on recycling.
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