asked Her Majesty's Government:

Whether they will put forward proposals to reduce the rate of taxation on biodiesel to promote the use of this alternative fuel.[HL6713]

The Government are committed to supporting biofuels as part of a long-term strategy to promote low-carbon transport. The Budget announced the extension of the 20 pence per litre duty differential for biofuels until 2008-09 and set out a range of announcements about the renewable transport fuel obligation, which will begin in 2008-09 and will ensure that biofuels comprise5 per cent of the road fuels market by 2010-11. Furthermore, we are awaiting state aid clearance to introduce an enhanced capital allowance (ECA) for the cleanest biofuels production plant, to support innovation and to help to develop the lowest-carbon biofuels production methods.

The Chancellor decides taxation policy considering all relevant economic, social and environmental factors. Any changes are announced in the context of his Budget Statement.