The $0.56 concessionary duty rate per litre for Euro V diesel will come into force tomorrow for two years, the Environmental Protection Department says.

The rate serves as a fiscal incentive to fuel suppliers to advance the Euro V diesel's availability in the local market and to drivers to use this more environmentally friendly fuel, the department said.

The $0.56 concessionary duty rate per litre for Euro V diesel is about half the ultra-low sulphur diesel's concessionary duty rate, which will make it more price-competitive. 

The department said all the major fuel suppliers have undertaken to duly reflect the duty concession when pricing Euro V diesel.

In the first eight months of this year, about 40% of the imported motor-vehicle diesel met the Euro V diesel specifications. Based on the import diesel prices for the period, Euro V diesel was more costly than ultra-low sulphur diesel by up to about $0.1 a litre.

The Government plans to make Euro V diesel the statutory requirement for motor-vehicle diesel from January 1, 2009, in tandem with the European Union. It will review the concessionary duty-rate arrangement before doing so.

Euro V diesel is suitable for all existing diesel vehicles. As compared with ultra-low sulphur diesel, Euro V diesel can reduce their sulphur-dioxide and particulates emissions by 80% and 5%.