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Daily Telegraph: Budget 2008: Biofuel subsidy surprise

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Fuel producers currently get a 20p per litre discount for selling biofuels

By Russell Hotten
Last Updated: 1:00am GMT 13/03/2008

The Treasury aims to raise £550m through the abolition of a biofuel subsidy in a move likely to undermine Alistair Darling’s claims that he delivered a Budget for the environment.

Fuel producers, including giants like BP and Royal Dutch Shell, get a 20p per litre discount for selling biofuels. But this is being abolished, to be replaced by fines if companies do not meet targets for biofuel sales.
 
The subsidy was introduced to encourage development of alternative fuel sources, but has now been condemned as a revenue-generator for the Treasury.

Ruth Dooley, tax partner at Grant Thornton, said: “Given the green statements made by the Chancellor in his Budget speech, it is a major surprise that he is penalising biofuels by over £500m without making any announcement either in the speech or in a press release.”

Details of the change were buried in the Red Book, the Treasury document that accompanies the Chancellor’s Budget speech. In the document, the Treasury says that its new tax treatment for biofuels “will provide a sharper environmental focus through its sustainability criteria”.

From 2010, the likes of BP and Shell will have to ensure that at least 5pc of their fuels are from renewables, with biofuels likely to be the main source, or face fines.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/13/cnbiofuel113.xml

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