Budget 2006: Brown turns green? - Future fuels

No increased tax breaks for bioethanol were announced by Mr Brown, although the existing duty differential of 20p between it and regular fuel was extended from the 2007/8 tax year to 2008/9.

Bioethanol is only a little cheaper than regular fuel, because of current production costs, . Last week, supermarket chain Morrisons started selling E85, so called because it's a blend of 85% ethanol with 15% petrol, at 84.9p per litre – 2p cheaper than petrol.

Mr Brown also said that, from 2007, he hoped that a plan for state aid to help bioethanol plants cut their costs and reduce pump prices would be cleared by the EU.

He also announced that motorists who register a car that can run on E85 will also now pay the slightly lower alternative fuel vehicle excise duty rates, which are £10 cheaper than for an equivalent petrol vehicle.

The roll-out of sulphur-free petrol to more forecourts around the country could also speed up, because changes announced in the budget should make it cheaper to distribute.

The fuel is essential for direct-injection petrol engines, such as the Volkswagen Group's FSI powerplants, to work at their optimum efficiency, and it also improves air quality. It costs more to produce than low-sulphur petrol, however, which has until now restricted its availability to a handful of forecourts close to refineries.

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