Future farming: Alternatives to red diesel

Red diesel is dyed fuel that is taxed at a lower rate than regular diesel and can only be used in a handful of contexts. The contexts in which red diesel is legally permitted were recently reduced as part of the UK’s commitment to moving towards a greener future.

Prior to the shift in policy, red diesel accounted for around 15% of diesel use in the UK and was responsible for approximately 14 million tonnes of carbon dioxide production every year. The new policy encourages businesses to adopt cleaner alternative fuels and limit their diesel consumption.

So, with the government banning red diesel in many previously permissible scenarios, what are the alternatives that businesses can shift to?

We are going to take a look at some of the alternatives to red diesel and explore the advantages and disadvantages of each one.

What are the alternatives to red diesel?

There are three main fuel alternatives to red diesel; white diesel, biodiesel, and HVO fuel. There is also the option to shift to electric vehicles and machinery.

The cost of each alternative is currently higher than the price of rebated red diesel. However, the long-term benefits and savings of switching to electric alternatives will likely outweigh the short-term costs, though these are also likely to be hefty.

But before we explore the alternatives any further, let’s start by finding out exactly what red diesel is.

What is red diesel?

Red diesel – commonly called “gas oil” – is the same as regular diesel (white diesel), but it is dyed red and is largely used for off-road purposes such as in agricultural vehicles and machinery. Historically, the taxes on red diesel have been significantly lower than on white diesel.

Because it is taxed at a lower rate than regular diesel, it is illegal to use red diesel other than for certain purposes. Red diesel is dyed so that inspectors can ensure that it is only used in vehicles and machinery that are legally permitted. The red dye stains the fuel tank, which makes it easy for inspectors to tell where red diesel has been used.

Until recently, red diesel was widely used in the construction and agricultural industries for machinery such as tractors, cranes, bulldozers, etc. It was also used for oil extractions, heating industrial buildings, and power generators in facilities with backup generators.

However, since April 2022, red diesel has been restricted to even fewer uses, and many industries and businesses now have to look for alternatives.

Why has the use of red diesel been limited?

During the 2015 Paris Climate Accords, all the participating countries agreed to publish their plans to tackle climate change on a five-year basis. So, the first announcements had to be made in 2020.

In 2020, the UK government announced plans to become carbon neutral by 2050. One of the initial policy changes was to remove the red diesel rebate from most red diesel users and have them switch to alternatives.

The increase in tax revenue would then allow the government to invest in greener alternatives, and the rise in costs would mean that businesses would use less fuel overall.

The policy was announced in 2020, but it didn’t come into effect until April 2022. This ensured that red diesel users were given adequate time to prepare for the shift.

When is it legal to use red diesel?

There are still some legally permissible uses of red diesel. The vast majority of red diesel users have had to switch to alternatives, but the following uses still qualify for the rebate:

vehicles and farm machinery for agriculture, horticulture, fish farming, and forestry.fuel for maintaining community amateur sports clubs as well as golf courses.fuel for heating and electricity generation in non-commercial premises.vehicles used to propel passengers, freight, or maintenance vehicles designed to run on rail tracks.fuel for all marine craft operating in the UK (including fishing and water freight industries), except for propelling private pleasure craft in Northern Ireland.fuel for powering the machinery (including caravans) of travelling fairs and circuses.

The government has been clear that none of these exemptions are fixed. Every five years, the use of red diesel in various contexts will be reviewed and may be reconsidered depending on the available alternatives.

So let’s now jump in and take a look at some of the current alternatives.

What is white diesel?

The most obvious alternative to red diesel is white diesel. White diesel is chemically the same as red diesel, and both produce the same amount of greenhouse gas emissions. The only difference is the dye used to colour red diesel, and the tax levied on them.

Until the recent policy change, white diesel was used to fuel on-road cars and was subject to much higher taxes than its red counterpart.

However, now, businesses and organisations that previously used red diesel to fuel their off-road vehicles and machinery may choose to move to white diesel.

The main issue with this switch is that white diesel is taxed much more than red diesel. The current tax rate on non-rebated diesel is 57.95 pence per litre.

What is HVO fuel?

HVO fuel stands for “hydrotreated vegetable oil” and is one of the cleanest fuels on the market. It is a diesel alternative that is synthetic, fossil-free and reduces greenhouse emissions by 90%.

HVO fuel is derived from plants or animals and is a renewable energy source as the materials used to create it can be easily replenished, although some HVO fuel is derived from palm oil, which is controversial for a number of trees that are felled to produce it.

Furthermore, HVO has a shelf life of around 10 years, which means it can be easily stored in bulk. By comparison, regular diesel lasts around one year.

However, there are also some disadvantages to using HVO fuel. For example, HVO is taxed at the same rate as white diesel, and it costs more per litre. This means that shifting from red diesel to HVO is more costly than shifting to white diesel.

Moreover, there is a limited number of HVO suppliers. This not only means that it can be harder to purchase HVO, but suppliers can also push their prices even higher.

That said, HVO is a good drop-in alternative to diesel, meaning that most equipment and tanks that take diesel can also run on HVO. Therefore, if you shift to HVO, you usually don’t have to pay any extra to update your equipment.

What is biodiesel?

Biodiesel is similar to HVO. It, too, is derived from plants such as rapeseed animal products like tallow, but the process of making the two diesel alternatives is different.

Biodiesel is carbon neutral and can be produced using waste products from the food industry. However, turning those waste products into biodiesel is expensive and ultimately means that biodiesel costs a lot more per litre than regular diesel.

As with HVO fuel, biodiesel is taxed at the same rate as regular diesel. So, overall it is a much more expensive alternative.

Biodiesel is also not a drop-in alternative to regular diesel. If you switch from red or white diesel to biodiesel, you will have to change your tanks and equipment.

Are there electric alternatives?

Electric vehicles and machinery are powered by lithium-ion batteries instead of fossil fuels. They offer a radical alternative to diesel-fuelled machines that many industries are turning to as the long-term benefits are judged to outweigh the short-term costs.

Electric alternatives produce no greenhouse gases, carbon emissions, or other particulates. No fuel is needed to run them, so there are no fuel, fuel tax, or fuel storage costs, only electricity bills, which are minor compared to diesel costs.

Furthermore, electric machinery requires less maintenance overall and has lower operating costs and longer warranty periods. And, to top it all off, most electric alternatives are quiet when they run, which makes for a much nicer working experience for the operators.

So what are the drawbacks to electric alternatives?

Electric machinery tends to be far more expensive than its petrol-fuelled alternatives. For example, electric cars, on average, still currently cost much more than regular cars. If you are choosing to make the shift from red diesel to electric, then you will need to buy entirely new equipment, which will undoubtedly add up to a hefty sum. Electric machinery also requires on-site charging stations, which can also be costly to install.

However, many businesses project that these short-term costs will be offset by the longer-term savings that will be made on things such as fuel costs.

What diesel alternative should you choose?

As we have seen, each red diesel has both advantages and disadvantages. So here is a summary of each for you to consider before making your decision.

White diesel is the easiest shift as it is exactly the same as red diesel, except it isn’t dyed, and it is taxed at a higher rate. So, while it offers an easy solution, you will end up paying more and creating the same amount of pollution.

HVO fuel is another easy shift as it is a drop-in alternative to red diesel. It is also a good renewable alternative to diesel that offers the same level of reliability. However, HVO is taxed at the same rate as white diesel and costs more per litre. It is also only stocked by a limited number of suppliers.

Biodiesel is not a drop-in alternative to diesel, so the shift would be more complicated. It is made from waste products, making it renewable and eco-friendly. However, the cost of producing it means that it is very expensive.

Electric alternatives are, in many ways, the best option. But there is the main caveat, which is that replacing all your old vehicles and machinery with electric versions is going to cost a lot. While many businesses believe that going electric will save them in the long-run, many others simply cannot afford the initial cost.

Summary

The UK government recently implemented a policy that reduced the number of contexts in which red diesel can be used. Fuel duty on red diesel is significantly lower than on white diesel and many of the diesel alternatives. Since then, businesses have had to choose which red diesel alternative to switch to.

Knowing which alternative to choose depends on your business, the number of vehicles and machines you use, and how much money you currently have to spare. While each option has its advantages and disadvantages, moving to electric alternatives is perhaps the best option in the long run if it is affordable.

Also read:
What is the difference between red and white diesel?
Red diesel: Rules and regulations explained