Could EU plans mean the end of red diesel?

Farmers’ diesel bills could sky-rocket if EU plans to remove tax exemptions for fuel used in agriculture get the go ahead.

From 2013, farmers could also be taxed on the amount of fuel they use as part of a proposal to encourage agriculture to be more energy-efficient.

A draft proposal by the European Commission on the taxation of energy and electricity says current legislation on fuel tax should be amended so EU tax policy can “contribute to green growth”.

Due to be published on Wednesday (13 April), the draft says current EU rules which allow member states to apply a level of zero taxation on energy used for agricultural purposes should be repealed.

The report, which argues for red diesel to come to an end by as early as January 2013, says the tax exemptions “add to the inconsistencies in the way different business sectors are treated on the internal market”.

It says agriculture is one of the important sectors largely left out of the EU’s Emission Trading Scheme.

Under updated rules, the proposal says a carbon tax of about €20/tonne emitted should be introduced to align agriculture to other industrial sectors.

The report also calls for an energy consumption tax on the basis of a price per gigajoule (GJ). Draft figures range from €0.15-9.60/GJ depending on the fuel type.

The report says the tax is necessary to “ensure advances in the field of energy efficiency”.

But it says current rules which allow member states to provide a tax exemption on biofuels should also be gradually phased out.

The document says the proposals “aim to ensure consistent treatment of energy sources to provide a genuine level playing field between energy consumers, independent from the energy source used”.

What do you think of the proposals? Have your say on the FWi forums.