Biofuels Duty Incentive

Budget 2002 introduced a 20 pence per litre (ppl) cut in the duty rate for biodiesel compared to ultra-low sulphur diesel. This came into effect on 26 July 2002. The Chancellor announced in Budget 2003 that the Government will reduce the duty rate for bioethanol by 20 ppl compared to ultra-low sulphur petrol with effect from 1 January 2005. Further support was announced in Budget 2004 with a commitment to maintain the 20 pence per litre duty rate cut for biodiesel and bioethanol until at least 2007; to discuss with stakeholders the implications of input-based taxation for biofuels; and to discuss the application of enhanced capital allowances (ECAs) to biofuel processing plants. Budget 2006 also announces an extension of the 20 pence per litre (ppl) biofuels duty incentive until 2008-09, offering further certainty to the industry. In addition, the RTFO buy-out price – the price paid by fuel suppliers who fail to meet their obligation – for 2008-09 will be set at 15ppl. The combination of duty incentive and buy-out price is also guaranteed at 35ppl in 2009-10 but will reduce to 30ppl in 2010-11.

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