Red Diesel - EU Threaten Infringement Proceedings

Issue date: 24 August 2011

The issue of the use of red diesel by private pleasure craft appears to be raising its head again.

IWA understands that the European Commission is threatening to open infringement proceedings against the UK Government in relation to its implementation of the Energy Products Directive and/or the Marking Directive (which sets out the rules for the marking of diesel fuel). We understand that the Commission’s threat is in relation to the continued availability of marked diesel in the UK for propelling private pleasure craft.

The current situation whereby the users of private pleasure craft can use red diesel, with duty payable at the full rate for diesel used for propulsion and at the rebated rate for diesel used for heating and lighting, dates back to 2008. IWA, RYA and BMF worked closely with HMRC to achieve this sensible arrangement following the ending of a UK derogation from the Energy Products Directive which permitted the UK to continue to levy a reduced rate of duty on motor fuel to be used for propulsion in private pleasure craft.

The Commission effectively seems to want private pleasure craft to use white diesel for propulsion. IWA, RYA and BMF are making representations to the Government encouraging it to contest any EU proceedings against the UK. IWA is arguing that it is simply not practical for most boats that use the inland waterways to have two tanks – one for red diesel and one for white; that inappropriate modifications would raise safety concerns; and that many diesel suppliers would not supply both red and white diesel. But fundamentally, we believe that the agreement reached in 2008 remains entirely consistent with the spirit of EU law and that the UK’s implementation in this manner therefore should not be regarded as an infringement.

Whilst this development is of concern there are no immediate implications. This is a legal process which can take years to conclude.