UK Budget extends fuel-duty relief and supports public EV charging while reducing hydrogen grants

The UK will extend fuel-duty reductions, provide £100 million to lower public electric vehicle charging costs, and cap bus fares at £2, while reducing capital grants for hydrogen and carbon capture as energy budgets are reprioritised towards defence.

The Budget published on the 28th of October combines immediate support for motorists and public transport users with changes to the taxation of electric vehicles, investment in rail and aerospace, and a proposed extension of carbon border measures to refined products.

The temporary 5p-per-litre fuel-duty reduction will remain in place until the 1st of July 2027, with the planned inflation-linked increase deferred to the same date. The extension is forecast to reduce receipts by £575 million in 2026–27 and £780 million in 2027–28. A separate 3.7p-per-litre red-diesel reduction will also continue until July, alongside the proportional relief associated with the main fuel-duty cut. Rail freight is among the sectors identified as benefiting.

Most heavy goods vehicles remain eligible for the previously introduced £1 annual vehicle excise duty rate for licences and renewals taken out between July 2026 and June 2027. For cars, vans, and motorcycles, VED rates will rise with the Retail Prices Index from April 2027. Tax-free business mileage allowances will be set permanently at 55p for the first 10,000 miles, with the rate above that threshold rising from 25p to 35p from April 2027.

For electric vehicles, £100 million over two financial years will reduce the cost of using local, lower-powered public chargers in Great Britain. The support begins in spring 2027 and is expected to save an average driver without home charging who charges on-street around £150 annually. A taskforce will also examine whether drivers could use their domestic electricity tariff at those chargers.

The government will nevertheless legislate to clarify that public and workplace charging attracts 20% VAT and does not constitute domestic use for Climate Change Levy purposes, effective from the 1st of November. By contrast, the temporary zero VAT rate on domestic electricity will be extended to July 2027. The Budget also records previously announced business rates relief for eligible charging points and EV-only forecourts.

Mileage-based Electric Vehicle Excise Duty for electric and plug-in hybrid cars remains scheduled for April 2028. Implementation measures include a mileage estimation tool, an optional connected-vehicle reporting system, and automated refunds by 2030. Company-car tax will also rise in 2030–31, with the appropriate percentage for zero-emission cars increasing from 9% to 10%, and that for cars emitting 1–50g CO₂/km from 19% to 20%.

The government intends to respond to the Zero Emission Vehicle mandate review by the end of 2026, with any changes taking effect from the 2027 compliance year. The Budget does not specify changes to the mandate’s targets.

Public transport measures include a £2 single bus fare cap in England outside London for 2027, financed through reprioritisation of energy department budgets. Rail commitments include more than £300 million for Leeds station improvements by 2030 and £30 million to progress Cardiff Parkway. The document also records a £1.2 billion contract for 29 battery-powered trains from Alstom’s Derby works, alongside continued development of Northern Powerhouse Rail.

In London, proposed business rates retention arrangements would support Underground upgrades at Euston and address capacity constraints at Stratford, subject to business cases. The government will also explore international services at Stratford International and enable a successor to the Elizabeth Line Business Rates Supplement to help finance future transport projects. A separate review will examine rail infrastructure costs. Road investment includes the start of A66 construction in November under a revised nine-year programme.

The energy provisions involve significant funding changes. Hydrogen capital grants will be reduced by £500 million and carbon capture, usage, and storage grants by £200 million. The government will prioritise mature projects in Teesside, Merseyside, and North Wales while considering loans and equity for further developments. Up to £300 million could be available for strategically important hydrogen projects, subject to affordability and value for money. Funding for the second Hydrogen Allocation Round will be considered at the next spending review.

The planned Gas Shipper Obligation will not proceed. Hydrogen support will instead be publicly funded, including a £27 million resource-budget increase for the first allocation round in 2027–28. A £2 billion Energy Wealth Fund will support renewable and low-carbon infrastructure, while eligible manufacturers will receive electricity bill reductions of up to 25% from April 2027.

For fuel suppliers, the government intends to consult on extending the Carbon Border Adjustment Mechanism to refined products. The proposal is intended to address refinery carbon-leakage risks, but the Budget does not settle its detailed coverage or timing.

Aerospace measures include a proposed ten-year, £2.5 billion joint programme with Rolls-Royce for next-generation civil and defence gas turbine technologies, including more efficient propulsion. The agreement has not been contracted and remains subject to negotiations and legal processes. Air Passenger Duty will rise with RPI from April 2028, while a further statement on Heathrow expansion is promised.

Maritime provisions focus on industrial capacity: the National Shipbuilding Office will oversee future civil ship procurement, and the Budget records agreed grant terms for design and engineering work at Port Talbot’s proposed floating offshore wind port.

US questions Airbus financing under EU aircraft subsidy truce

US Trade Representative Jamieson Greer has questioned whether European Investment Bank financing for Airbus is consistent with the transatlantic agreement suspending aircraft-related duties, warning that uncertainty over the loan risks renewed friction in aerospace trade.

In a statement on the 26th of October, Greer said the US had still not received details of the financing despite repeated requests. He recalled that the suspension of duties was accompanied by a mutual commitment to provide financing to large civil aircraft producers on market terms and called for the issue to be resolved promptly.

The statement challenges the terms of the financing but does not establish a breach of the agreement or announce the reinstatement of duties.

The EIB announced the financing on the 29th of June, when it signed an initial €1 billion loan under an approved €3 billion envelope, described as its largest corporate loan authorisation. The distinction matters: the June announcement concerned the first tranche, rather than the signature or disbursement of the full €3 billion.

The financing supports Airbus research and development through 2030 in France, Germany, and Spain, covering advanced commercial aviation technologies and integrated systems, as well as security and defence systems. The EIB placed the operation under its TechEU initiative and presented it as support for European technological autonomy, industrial competitiveness, and manufacturing capacity.

Airbus said the facility’s competitive terms, long maturities, and flexibility would help it sustain investment while managing its balance sheet and financing costs. Its broader innovation programme includes advanced manufacturing, decarbonisation technologies, and connected aerospace systems.

Greer’s intervention brings those industrial objectives into the continuing debate over the conditions under which public financing for aircraft manufacturers is compatible with the US-EU arrangement. Neither the EIB announcement nor the supplied US statement provides the detailed loan terms needed to assess that question.

FuelsEurope warns investment delays threaten 2030 synthetic aviation fuel supply

EU production capacity could be sufficient to meet the overall 2030 sustainable aviation fuel requirement, but delays in investment decisions threaten the availability of synthetic fuels needed to meet the separate e-SAF obligation, according to FuelsEurope.

The association’s September renewable fuels outlook estimates that existing facilities and projects that have reached final investment decision could provide around 13.5 million tonnes of annual renewable fuel capacity by 2030, including approximately 5.2 million tonnes of SAF. That compares with its estimated 2030 SAF mandate requirement of 3.1 million tonnes.

The assessment distinguishes overall SAF capacity from the much smaller committed pipeline for synthetic aviation fuels. FuelsEurope identifies 15 announced e-fuel projects representing around 1.4 million tonnes of annual capacity, but says only one project, with capacity of 1,500 tonnes annually, has reached final investment decision and is included in its capacity outlook.

Because projects typically require several years between investment approval and commercial operation, the association warns that those without a final investment decision by the end of 2026 are unlikely to contribute materially to supplies available in 2030. It calls for investment conditions and regulatory certainty capable of bringing projects forward.

Most of the expected SAF expansion relies on hydroprocessed esters and fatty acids, through dedicated biorefineries and co-processing in conventional refineries. Biomass-to-liquids and alcohol-to-jet projects could contribute towards the end of the decade, subject to timely investment decisions.

Existing EU renewable fuel capacity is estimated at 8.2 million tonnes annually, including almost 2 million tonnes of SAF. Dedicated facilities account for approximately 58% of renewable fuel capacity and refinery co-processing for 42%.

The report also cites EASA figures showing that SAF accounted for 2.8% of aviation fuel supplied at EU airports in 2025, exceeding the initial 2% requirement, and was available at 121 airports. Its forward estimates concern production capacity rather than guaranteed output or deliveries: the apparent adequacy of the wider SAF pipeline does not resolve the separate synthetic-fuel investment shortfall.

ACEA warns truck weight compromise could undermine zero-emission vehicle uptake

European vehicle manufacturers have warned that negotiations on the Weights and Dimensions Directive risk preserving operational disadvantages for zero-emission trucks, arguing that higher vehicle weight allowances will have limited value unless negotiators also address axle limits and enforcement requirements.

In its priorities for a trilogue agreement, dated the 20th of October, ACEA calls for sufficient additional weight allowances for two-axle, 4×2 motor vehicles, which it says account for approximately 75% of the long-haul market. Excluding these configurations from adequate allowances would leave a major market segment at a competitive disadvantage and impede the transition needed to meet manufacturers’ CO₂ targets, the association argues.

ACEA also wants the drive-axle weight limit increased beyond the current 11.5 tonnes. It says retaining that ceiling would prevent many zero-emission vehicles from making use of higher overall weight limits, restricting their operational flexibility and ability to carry payloads comparable to conventional vehicles. Increasing permitted vehicle weight without adjusting the axle limit would therefore leave much of the intended benefit theoretical.

The association opposes making additional weight allowances conditional on mandatory on-board mass monitoring and data transmission through the smart tachograph exclusively for zero-emission vehicles. It argues that such requirements would impose additional costs and complexity on the vehicles the revision is intended to promote.

ACEA further calls for a transposition period of no more than 18 months, citing the proximity of the 2030 heavy-duty vehicle CO₂ targets. The Commission proposed the revision in 2023 as part of its Greening Freight Package, with the aim of removing operational barriers to cleaner freight transport.

The manufacturers warn that, without these provisions, they would not support the final agreement as a credible improvement to the conditions needed for zero-emission road transport. The paper sets out ACEA’s assessment of the negotiations; it does not establish the contents of an agreed compromise.