Hydrogen policy anomalies

Working across industry, the Institution of Mechanical Engineers has come together with partners to highlight policy anomalies around hydrogen, the barriers they create to a level playing field and to suggest remedies to achieve a truly technology neutral level playing field for decarbonisation.

• Download the full policy note

Recommendations

1. Tie the rate of VAT on hydrogen in transport to red diesel
   By pegging the level of VAT on low carbon hydrogen (or zero carbon) and biodiesel to the same rate< as red diesel, hydrogen can compete on a level cost basis.
2. Include hydrogen as a fuel for “qualifying uses”
   This creates a level playing field for hydrogen against other alternatives, notably fossil fuels.
3. Remove electricity and grid taxes for any hydrogen produced for heat consumption.
   This will prevent double taxation and ensure the tax rate is equivalent to the end uses that hydrogen is displacing i.e. natural gas, coal, etc.
4. Expand the RTFO to apply to hydrogen uses for any mode of transport
   a. The RTFO is designed to incentivise fuel switching and emission reduction. The hardest emissions to abate however are in rail, shipping, aviation, and non-road vehicles.
   b. This also creates options for the UK to become a global leader in these fields, as opposed to competing solely in the more saturated road vehicle market.
5. Re-instate the Plug-In-Grant for fuel cell vehicles, up to 10,000 vehicles in the UK.
   a. The rate will remain at £3,000 as per other ULEVs, but it will be available for fuel cell vehicles above £50,000.