New EU law could increase price of diesel by 25%

The European Union is set to propose new regulations which could see British fuel prices rise by up to 25 per cent.

Basing fuel tax on energy content rather than volume will mean a significant price rise for haulage companies and private motorists who use diesel.

Under the plan, EU tax commissioner Algirdas Semeta will call for separate taxes on carbon dioxide and fuel consumption.

Half of all new cars purchased are now diesel, leading the industry to fear another slump if taxes rise.

Matthias Wissmann, president of the German Association of the Automotive Industry, said: "Under this new tax structure sales of diesel cars will likely drop significantly - to the detriment of environmental protection.

"A diesel automobile is more efficient and emits less CO2."