George Osborne urged to abandon fuel duty escalator in order to meet air quality targets

According to a new study supported by UK energy firm Calor, the health and environmental benefits of removing the escalator are compelling.

Calor commissioned the work in the wake of the Government’s National Air Quality Plan, which was recently submitted to the European Commission.

Clean Air Zones will be introduced in five cities across the UK, including Leeds, Birmingham, Derby, Southampton and Nottingham aimed at reducing emissions from taxis, vans and HGVs by 2020.

Transport for London will also introduce an Ultra-Low Emission Zone, starting in 2018.

The plan from DEFRA recognises the potential of LPG to help bring down harmful emissions, acknowledging that automotive LPG is cleaner than traditional transport fuels.

Furthermore, LPG provides a proven solution to reducing emissions from taxis, vans and HGVs quickly and at no expense to the tax payer.

However, LPG is currently subject to a duty escalator of 1p per litre per year to 2024, although it has never been triggered. The escalator was introduced in 2008 with reference to the 2003 Alternative Fuels Framework which compared the environmental benefits of alternative fuels with natural gas. However, this is no longer a valid comparison as natural gas and LPG are mostly used in separate segments of the transport market i.e. natural gas for buses and HGVs with LPG used in taxis, vans and cars. Therefore the correct comparison for Government to consider is between LPG and petrol or diesel where LPG has proven environmental advantages.

Building on the findings of their cost-benefit analysis, Calor concluded that the total revenue loss to HMRC of removing the duty escalator is only £37m but the corresponding total abatement value of avoided emissions is significant at £75m.

This is why the organisation is calling for the Chancellor to drop the escalator in his forthcoming Budget. 

The energy firm suggest that it would send a positive signal to taxi, van and HGV drivers who may consider switching to LPG to extend the life of their existing diesel vehicles.

Such a move, Calor argues, would also send a positive signal to vehicle manufacturers, fleet managers and individual owners, promoting the uptake of further conversions and the availability of new LPG production vehicles.