Introduced to encourage organisations to reduce their energy use and carbon emissions, the Climate Change Agreement Scheme allows organisations to receive a discount on their Climate Change Levy (CCL) if they meet certain reduction targets. In his first Budget, Chancellor, Rishi Sunak took the opportunity to reopen the scheme to new members, meaning more organisations can now take advantage of the cost savings available.
Due to run until 31st March 2023, the Government has proposed that the scheme is extended until 2025. While the proposed extension is good news for current members, the Government has put forward several changes to the scheme which businesses should be aware of.
Scheme Extended until 2025 – The proposed extension will allow existing CCA participants to benefit from a further two-year target period – known as TP5. Eligibility criteria remain unchanged, so if you still meet the qualifying criteria your business can continue within the scheme.
Baseline Changes – Scheme members had been previously monitoring their performance against a 2008 baseline. The Government propose to change this to a 2018 baseline, as well as proposing that any banked surplus from Target Periods 1 – 4 will not be available for use against Target Period 5.
This re-baselining will mean that businesses who have managed to achieve their targets and therefore bank surplus carbon won’t be able to transfer the surplus across in future years. So, they are effectively losing the advantage they have gained by becoming more energy efficient – and will have more pressure on achieving their targets.
Buy Back Costs – Organisations who fall sort of their efficiency targets will still be able to pay a buy-out fee so they continue to receive their CCL discount. However, the price of buy backs looks likely to rise. This is currently set at £14/tonne of CO2 equivalent by which the target has been missed – it is proposed in the latest BEIS consultation to increase this to £18/tonne.
Is a CCA still worth it?
We will have to await the consultation outcome, but in short, yes – a CCA still delivers good value to many organisations. In fact, due to rising CCL rates, it is estimated that this extension will save businesses around £300m each year. And of course, energy-intensive users will also benefit from the ongoing savings of any efficiency measures they put in place.
Savvy businesses should make sure they are preparing now so that they reach their efficiency targets. It’s worth noting that those required to comply with the Streamlined Energy and Carbon Reporting (SECR) scheme can also include any carbon or energy reduction measures they take to achieve their CCA in their SECR reports.
Don’t go it alone
Ensuring CCA compliance can be a challenge, and even more so in the current climate, with many businesses facing a reduced workforce and extra responsibilities. To maintain the maximum benefit of your CCA, you’ll need to ensure you qualify for the full CCL discount, meaning you must successfully complete a 70/30 evaluation.
If you need help in achieving CCA compliance – whether that’s performance monitoring, 70/30 reassessment, or reassessing what is possible from an energy efficiency perspective, get in touch. We can bring you new techniques and opportunities as part of our consultancy.
Get in touch to find out more about our CCA service.