The Treasury has announced that the CRC Energy Efficiency Scheme (CRC) will close from April 2019 and that a new streamlined annual reporting regime will be introduced. The final CRC reporting year will be 2018/19, with the corresponding reports submitted in summer 2019. Although the announcement had been expected, the termination date for the CRC is later than had recently been rumoured and provides businesses with certainty for the next three years while a consultation takes place on the new reporting framework. It is proposed that the eligibility criteria for the Energy Savings and Opportunities Scheme (ESOS), or similar, is used to decide who should be included. Annual reporting is expected under the new regime, and a full consultation on the detail of the scheme will be launched in summer 2016.
The CRC, which was introduced in 2010, applies to businesses that consume more than 6,000 MWh through settled half hourly meters. Electricity and gas consumption is reported annually as tonnes of CO2, against which allowances are purchased at a current cost of £15.60/tCO2 for the forecast sale and £16.90/tCO2 for the compliance sale. While the government is keen to streamline carbon reporting, the Treasury does not want to lose this income stream once the CRC is abolished and, therefore, Climate Change Levy (CCL) rates will be increased from April 2019. In addition, CCL rates will be rebalanced for different fuel types to reflect recent data on the fuel mix used in electricity generation, moving to a ratio of 2.5:1 (electricity:gas).
Climate Change Agreements (CCAs) will continue for businesses that are eligible and those with CCAs will receive an increased discount to CCL from April 2019, moving to a 93% discount for electricity (currently 90%) and 78% for gas (currently 65%). The purpose being that despite the increase in CCL, they will not pay more than previously expected under RPI increases. CCAs are available to energy-intensive industries in particular sectors, such as the chemicals sector, that conduct certain processes. In return for meeting energy efficiency targets, these industries obtain a discount to the CCL charge to their eligible energy use. The government will keep the existing CCA scheme eligibility criteria in place until at least 2023.
The Chancellor announced that Carbon Price Support will remain capped at £18/ tCO2 to 2019/20 and will increase by RPI in 2020/21. The long-term direction for Carbon Price Support will be given in the autumn 2016 statement. The Carbon Price Floor has been the issue of debate in recent months as industry calls for a level playing field with Europe when it comes to carbon costs and for the tax, which is applied to fossil fuels used in generation, to be frozen or abolished. However, a number of suppliers see the Carbon Price Floor as essential to encourage investment in low-carbon generation and to prolong the operation of some nuclear plants.
In the consultation response, the government stated its support of Mandatory Greenhouse Gas (GHG) Reporting, heeding calls from large businesses such as Marks & Spencer, Nestlé, and the BT Group, for it to remain. GHG reporting is an existing annual requirement for listed companies to publish their organisation’s emissions in their company’s annual reports. This obligation already meets some of the requirements of the EU Non-Financial Reporting Directive, the implementation of which is currently under consultation in the UK ahead of its introduction in 2017.
An allocation of £730 million was made in the Budget for further Contract for Difference auctions over the course of this parliament for offshore wind and other less established renewable technologies, for projects generating electricity in 2021 to 2026. In their response to the announcement, Renewables UK commented, “We welcome the Chancellor’s announcement that funding will be available for future rounds of competitive auctions to support offshore wind farms”. Other green groups felt that the commitment did not go far enough, particularly as there was no clear support for biomass or solar.
Notably, the Paris Agreement was not mentioned in the Chancellor’s budget speech, despite calls from businesses such as Unilever for its clear inclusion, as well as a commitment to building a low-carbon economy. An announcement on carbon targets is expected by autumn 2016.