Exactly!
Broadly speaking, governments are motivated by a desire to remain as governments (or to credit them with a little bit more of a long term view, to remain as governments for a period of time, and to return to being government after as short an interval as possible).
Those objectives are, first and foremost, attained by not pissing off too many people..
Governments piss people off either by doing something very specific that lots of people don't want them to do, or by doing a whole load of things that collectively make people's lives worse.
The trade off for governments is that very often, the specifics that will piss people off run contrary to the run of things that will make things worse.
As such, whether a government will do something is a balancing act between how many people will be upset by the immediate action, and how many people will be upset by the consequences of that action.
In this case, clearly a small number of boaters would be unhappy with the loss of red diesel, but not really enough to make a difference.
There would be economic outcomes, in terms of businesses folding, but not huge. Environmental impacts, but not huge.
The question is "what arguments will work";
I would suggest;
1) You will make a few people annoyed, and less likely to vote for you.
2) You will not make anybody like you more (there is no PR capital in going along with this)
3) You will drive some small businesses to the wall (negative PR)
4) There will be an environmental incident that will be attributed to the change (negative PR)
5) There may be a reduction in boating activity, and in CRT income. CRT could fail (negative PR)
6) Doing this, with all its PR risks isn't going to bring in any revenue.
7) By not doing it, you are standing up to the EU (which plays well to your voters), even if you eventually give in.
The government will fight this, because it makes sense for them to do so. However, the purpose of that fight is so that any negative effects can be blamed on the EU. We need to convince them that even without the EU bashing angle, this makes sense.