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Concours 2024 – What fuels should be powering the cars of the future?

Debate at the Royal Academy of Arts reveals there is no coherent government policy for taxing motorists or fuel companies in the future

As arguments rage about what fuels should be powering the cars of the future – the Government has no strategy about how the fuels should be taxed

Simon Sutcliffe, customs and excise Partner said:

Following a debate at the Royal Academy of Arts last week entitled, ‘The Future of Fuel: The Road to Zero Emissions’ attended by proponents of electric, hydrogen, and biofuels it is clear that the replacement of conventional fuel types will result in the loss of tax revenue for any government. Innovative forms of taxation will have to be devised to maintain those revenues, push forward any government green policy and change consumers and manufacturers behaviours.

The debate was part of Concours on Savile Row which saw thousands of people flock to the famous tailoring street where more than 50 cars and motorcycles were on display. No immediate victor in the world of renewable fuels emerged at the debate, and tribalism still exists between the proponents of electricity, liquid and gas-related fuels.

Whilst discussions take place on the best fuels or fuels to take us into the later 21st century, the source and creation of these fuels needs to be considered. Creating a fuel of the future that is emission-free at the point of manufacture that still emanates from unrenewable and polluting production defeats the purpose.

The government needs to tackle the methods of production of these fuels and tax them accordingly. It has gone some way to addressing this issue with the Renewable Fuel Transport Obligation (RFTO) which obligates suppliers to ensure that a certain percentage of their fuel comes from renewable and sustainable sources. The suppliers then redeem certificates showing their compliance. However, they can also ‘buy out’ of their obligation. Therein lies the first issue.

Further, electricity is not included in the RFTO unlike other EU jurisdictions, where they operate something akin to a Renewable Transport Energy Obligation (RTEO) This means that this type of ‘fuel’ for vehicles does not face the same obligations on sustainability. With the different VAT rates on domestic electricity supplies and commercial supplies – this also creates a disparity. Another issue to address.

There are a number of initiatives and models in respect of other fuels – such as the Hydrogen Production (HPBM) model and the UK Emissions Trading Scheme (UKETS) (another ‘cap and trade’ scheme – similar to a pay to pollute model), Renewable Fuels of Non-Biological Origin (RFNBO). A rationalisation of the projects (and acronyms) and a commitment to support a particular direction would be useful for the automotive industry.

Geoff Love, Managing Director of Hothouse Media, who organised Concours on Savile Row said:

The lively debate and the interest from the attendees shows that the road to net zero has many twists and turns that we have yet to fully explore.

Would you like to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Simon Sutcliffe using the form below.

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