Government gives green light to those eligible to save money and set course for net zero
For any business with eligible processes and plans to reduce energy or carbon emissions, applying for a Climate Change Agreement (CCA) should be a no-brainer.
The government has published its response to the consultation on an extension to the current scheme for CCAs, which relieve eligible energy-intensive users from most of the costs of the Climate Change Levy (CCL). The consultation outlined proposals to extend the scheme by two years and open it up to new entrants, allowing eligible facilities not currently participating to apply to join in 2021. The consultation received 101 responses, which fed into the final decision-making.
The government response confirmed the extension to the existing CCA scheme, with the introduction of a new Target Period (TP5) that will run from 1 January 2021 to 31 December 2022. For companies that meet the required criteria, CCL relief will run to the end of March 2025 through the addition of a new Certification Period (CP6). The CCL discount currently stands at 92% for electricity and 81% for gas.
New Entrants:
New entrants can now apply to join existing sector agreements, with the Environment Agency expected to certify eligible new entrant facilities between 1st January 2021 and 31st March 2021, taking effect on the date of assent. The deadline for applications to the Environment Agency has been extended to 30 November 2020. It should be noted that new applications are made via the relevant sector association and that some sectors are setting their own, earlier, deadline.
The proposed reopening of the scheme for new applicants is an opportunity for eligible companies, that may have missed the previous deadline, to now benefit from CCL savings. These savings can be reinvested in actions to reduce their carbon impacts, which is of increasing importance to companies and their stakeholders. Of course, there are some CCA costs incurred, which must also be taken into account.
Targets and buy-outs:
CCA participants are set an energy efficiency target over a two-year period. The government has proposed a 6.67% target for TP5, across all sectors, commenting that “targets have been set to reflect the need to decarbonise and improve energy efficiency as required to deliver net zero and achieve the Government’s objective to improve energy efficiency by 20% in businesses and industry by 2030”. However, BEIS and the sector associations are still negotiating the TP5 targets, which will be confirmed by 11th December at the latest. Interestingly, this could mean a final sector target is agreed after new applications have been submitted.
If participants miss their target, and wish to keep their CCA in place, they must cover the underachievement by paying a buy-out fee. It should be noted that the buy-out price will increase to £18/tCO2e for TP5.
The new baseline period for TP5 will be calendar year 2018. Due to the new baseline, any surplus accrued between TP1 and TP4 will not be permitted to be brought forward to TP5.
Looking ahead
The government acknowledged the views submitted on the potential reform were there to be a future CCA scheme. It expects to confirm a timeline for further engagement on a future CCA scheme shortly.
To learn more about this scheme, savings, and timeframes, as well as the relevance to net zero, listen to the podcast episode, Don’t delay your CCA – Government gives green light to those eligible to save money and set course for net zero.
