- REA urge Government to postpone the proposed change to red diesel policy for five years;
- Organics recycling sector’s entitlement to use red diesel ends in April 2022;
- Businesses warn that changes could result in redundancies and closures.
The Association for Renewable Energy and Clean Technology (REA) is urging the Government to postpone the proposed changes to red diesel policy for five years until 2027.
The waste sector is set to lose the entitlement to use rebated fuel (red diesel) from 1st April, a move which would likely see already razor thin profit margins evaporate, resulting in businesses having to make redundancies or cease trade entirely.
The REA say that, without an alternative to diesel currently available to the organic recycling sector, the change will dramatically increase costs to businesses whilst simultaneously failing to deliver the intended environmental benefits. The policy will also create unfair competition – agriculture and horticulture sectors remain eligible for red diesel – meaning some on-farm AD and composting sites will be able to charge lower gate fees for accepting waste than off-farm sites who cannot.
While the REA strongly supports the transition to sustainable and renewable fuels, they say that removing the organics recycling sector’s entitlement to use red diesel at this time would add an unacceptable and unaffordable financial burden on to businesses that are already facing increased costs due to HGV driver shortages, energy prices rises (which are set to increase even further), and the need to meet increasing environmental standards.
Until there is a viable alternative to diesel in the organics recycling industry, the REA and its members are calling on the Government to postpone the proposed change to red diesel policy for five years until 2027, to enable the development alternative-fuelled vehicles and machinery and clear guidance on the permitted use of red diesel.
Jenny Grant, Head of Organics and Natural Capital at the Association for Renewable Energy and Clean Technology (REA), said:
“While we strongly support the transition to sustainable and renewable fuels, removing the organics recycling sector’s entitlement to use red diesel at this time would add an unacceptable and unaffordable financial burden on businesses which are already facing a perfect storm of worsening cost pressures.
“We have been in constant contact with our members who are warning about the impact this change would have on their business. Businesses are facing incredibly difficult decisions, with many saying they will have to make redundancies or even cease trading entirely.
“That is why we are urging the Government to delay the proposed reform to red diesel policy for five years until 2027 to enable the development of viable alternative-fuelled vehicles and machinery.
“The Government must postpone this change – jobs and businesses are on the line.”
Gary Short, Managing Director of Shorts Group Ltd, operating throughout Berkshire, Bucks and Surrey, said:
“The financial impact across Shorts Business will be £0.5m per annum – inevitably this will impact on staffing levels as we will not be able to cover these costs by price increases and savings will have to be sought.
“Given the inflationary pressures we are all facing and the uncertainty we have navigated through the pandemic, this fuel change is just the most unwelcomed tax at a time when businesses need support and the country needs to get back up and running. The timing of this is ill-thought-out.”
Grant Keenan, Managing Director of Keenan Recycling, based in Aberdeen, said:
“The removal of red diesel entitlement will cost us around £300,000 a year. If councils are unwilling to accept a rate rise under existing terms we will have to consider letting staff go to manage this cost.
“We have investigated investing in electric machines, but the cost is prohibitive. We have also considered alternative fuels, such as HVO (hydrotreated vegetable oil), but this is more expensive than diesel. In short, there is no ‘green’ alternative at present.”
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Notes to editors
A briefing on the red diesel entitlement changes is attached to this email.
The REA is also calling for increased funding for R&D into vehicles equipped for the sector that do not run on fossil fuels and incentives for their uptake.
About the Association for Renewable Energy and Clean Technology (REA):
The Association for Renewable Energy and Clean Technology (known as the REA) is the UK’s largest trade association for renewable energy and clean technologies with around 550 members operating across heat, transport, power and the Circular Economy. The REA is a not-for-profit organisation representing fourteen sectors, ranging from biogas and renewable fuels to solar and electric vehicle charging. Membership ranges from major multinationals to sole traders.
For more information, visit: www.r-e-a.net