The concession which provides farmers with 'red' diesel at a lower rate of duty are under threat. The diesel is coloured red so that checks can see if it is being used illegally off farm.
Draft plans by the European Commission say that current EU rules that allow member states to apply a zero rate of taxation on energy used for agricultural purposes should be repealed. The objective is to allow EU tax policy to contribute to 'green growth'.
The document argues that agriculture is one of the important sectors left out of the EU's Emissions Trading Scheme. The proposal says that a carbon tax of about £20/t should be introduced to bring agriculture in line with other sectors of the economy. It also calls for an energy consumption tax.
The news has been greeted with dismay by farming organisations at a time when oil prices have been rising. The duty rate on red diesel has increased nearly fourfold over the past decade. Farmers were paying an average of 63p a litre for red diesel in February, up from 46.9p in February 2010. This still compares very well with the price paid by hauliers and motorists.