Climate Change Agreements Scheme – Extended to 2027

21 March 2023

One of the useful measures contained in last Wednesday’s budget was confirmation that the current phase of Climate Change Agreements (CCA) will be extended for a further 2 years to March 2027.

Climate Change Agreements were first established in the early 2000s after the introduction of the Climate Change Levy. Their purpose is to encourage greater uptake of energy efficiency measures among companies in energy-intensive industries and to relieve competitive distortion brought about by an additional tax on UK industry. They set energy reduction targets for businesses which can result in a significant discount on the Climate Change Levy on energy bills. Find out more about the scheme and its eligibility criteria here.

Although the budget statement confirmed the extension of the current phase until March 2027 several other proposals are subject to a formal consultation process. Previous experience would suggest that the current proposals are likely to be adopted in full. However, for those minded to participate in the consultation the details are available here.

What are the proposals?

• The scheme will be open to new entrants between May and September 2023. However, the consultation period does not conclude until the 10^th May and therefore our expectation would be that the final version of the regulations will not be available until early summer and the application window is therefore likely to be shortened or extended.
• The eligibility criteria, sectors, and rules will remain the same.
• Financial penalties for noncompliance and incorrect reporting will increase.
• There will be increased reporting requirements at TP6 to disclose implemented and potential energy and carbon reduction activities at CCA sites.

What are the proposals for relevant targets?

• A new target period (TP6) will be introduced covering January to December 2024. However, it is proposed that January to December 2023 will remain uncovered by a target.
• The indicative timeline is that the targets will be confirmed in November 2023.
• Carbon costs for failing target units will increase from £18 to £25 / tonne.
• The base year for TP6 will remain as 2018.

What does this mean for you?

The announcement gives current CCA holders more clarity as future CCL savings are now secured under the current CCA scheme until at least 2027, subject to meeting your targets or paying carbon buyout costs.

Although we have seen a significant reduction in wholesale energy prices since the peak of late summer / early autumn 2022 our procurement team does not foresee prices returning to the “old world” of 2019/20 in the foreseeable future. Therefore, it remains important to develop a robust energy optimisation plan to reduce costs and the associated carbon emissions and avoid the increased carbon costs associated with missing CCA targets.

If you think you could be eligible for the scheme, please give our team a call on 08451 46 36 26, or email us at enquiries@inenco.com.