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U.K. budget fosters natural gas vehicle use

Dec. 9, 1996

The U.K. government has reduced taxes on compressed natural gas used as road transport fuel, in disclosing its annual budget late last month. British Gas plc, which is developing natural gas vehicle (NGV) technology, has welcomed the move as a turning point for NGV use in Britain. Announcing the tax cut in Parliament, Chancellor of the Exchequer Kenneth Clarke said, "I want to encourage high-mileage vehicles in our towns and cities to switch to cleaner gas power.

The U.K. government has reduced taxes on compressed natural gas used as road transport fuel, in disclosing its annual budget late last month.

British Gas plc, which is developing natural gas vehicle (NGV) technology, has welcomed the move as a turning point for NGV use in Britain.

Announcing the tax cut in Parliament, Chancellor of the Exchequer Kenneth Clarke said, "I want to encourage high-mileage vehicles in our towns and cities to switch to cleaner gas power.

"Last year's budget changes broadly equalized the pump prices of compressed natural gas and gasoline. From tonight, I am reducing the duty on road fuel gases by a further 25%."

To encourage truck owners to fit particulate traps or convert to compressed natural gas, Clarke also announced a plan to reduce annual road taxes by £500 ($750) for vehicles meeting forthcoming stringent emissions standards.

Roy Gardner, executive director of British Gas, said, "These changes could prove as important as the tax measures that popularized lead-free gasoline. This movement to encourage NGVs has to be good news for the environment."

Tom Gorman, general manager of British Gas Natural Gas Vehicles, said, "The welcome financial incentives provided by the chancellor, amounting to about 20 pence/l. (30¢/l.) differential for natural gas over gasoline and diesel, should kick-start the industry."

A British Gas official said auto manufacturers including Honda, Volvo, and BMW have developed compressed natural gas engine vehicles and are waiting to see if the private NGV market takes off in Britain.

At the same time, Clarke reduced the duty on ultralow-sulfur diesel fuel by 1 pence/l. (1.5¢/l.), with the intent of equalizing its pump price the same as ordinary diesel fuel.

U.K. Petroleum Industry Association (Ukpia) criticized the move, saying ultralow-sulfur diesel fuels are more expensive to produce than the subsidy given and have little effect on overall air quality and particulate emissions.

Ukpia Director General Michael Frend said, "Extensive studies have shown that ultralow-sulfur diesel is not a cost-effective way of tackling urban air pollution."