EXTENSIONS to deadlines for new applicants and counter proposals to Climate Change Agreement scheme have been announced by the Government.
Climate Change Agreements work by setting targets for reducing businesses’ energy use in return for discounts on the climate change levy on their energy bills.
In Spring Budget 2020, the Government announced that the current Climate Change
Agreements (CCA) scheme would be reopened to new entrants for a set period and
extended for a further two years until March 2025.
Almost 9,000 facilities across the UK currently benefit from participation in the scheme,
and a recent evaluation of the scheme found that in most participating sectors
participation was between 80-100% of eligible businesses.
A consultation to the extension was announced in April 2020, setting out the Government’s proposals for how this extension would be implemented and sought views on potential reforms were there to be a future CCA scheme.
There were 101 responses to the consultation in total, 43 of which were from sector/trade associations (with 37 Climate Change Agreement holders), 16 from consultants, 36 from businesses, 3 from individuals, 2 from energy suppliers and 1 academic.
Nearly all respondents welcomed the extension and certainty on the Climate Change Levy (CCL) discount, worth some £300m annually to businesses.
Many felt that the proposals were appropriate for extension as these followed similar patterns of previous periods.
There was broad support among respondents for maintaining existing rules and eligibility criteria as this provided consistency for operators during a time of economic uncertainty.
While responses to the proposals were generally positive, many raised concerns about the tight timelines as well as specific aspects, such as an increase to the buy-out price and inability to use surplus in the added Target Period.
To inform longer-term review, the consultation invited views on how a future CCA scheme
beyond March 2025 could be targeted to better deliver value for taxpayers’ money and to
support the UK’s commitment to net zero.
Responses highlighted that a future reformed scheme could help industry in the transition to net zero, whilst supporting the competitiveness of businesses.
Respondents also gave views on the eligibility criteria for a future scheme, the need to support both energy efficiency and carbon savings, and the potential for simplification of any future scheme and the wider policy landscape.
Summary of Government decisions in response to the consultation:
- Confirmed Target Period (TP) and Certification Dates (CP):
- TP4: 1 Jan 2019 to 31 Dec 2020
- TP5: 1 Jan 2021 to 31 Dec 2022
- CP4: 1 Jul 2019 to 30 Jun 2021
- CP5: 1 Jul 2021 to 30 Jun 2023
- CP5: 1 Jul 2021 to 30 Jun 2023
- Eligibility: The current eligibility criteria will be maintained for the extension.
- New Entrants: New entrants will be allowed to apply to join existing sector
agreements, with the Environment Agency expected to certify eligible new entrant
facilities from January 2021. The deadline for applications is extended to 30 November
- Baseline for Targets: The baseline period is to be updated. Where discrete data for
2018 is not currently available, appropriately adjusted Target Period 3 (covering 2017
and 2018) data may be used instead to estimate a 2018 baseline.
- Target Setting: The process for agreeing sectoral targets will remain as proposed,
although, where required, we have extended the deadline for counter proposals up to 30
October 2020 at the request of sector associations.
- Surplus: Surplus will not be allowed to be brought forward to use in the added Target
- Buy-out Price – This will increase as proposed to £18/tCO2e for Target Period 5.
Target Period 4 buy-out remains at £14/tCO2e
- Financial Penalty Price: Increase to the financial penalty price for penalties related to Target Period 5 in line with the buy-out cost per tCO2e for the appropriate target period;
the financial penalty will increase to be the greater of £250 or £18/tCO2e.
- Other Aspects of the Scheme: Government intends to maintain all other scheme rules and processes for the purpose of this extension. A short window to make some specific
amendments to agreements will be opened in 2021, with separate guidance to follow on
- Next Steps and Milestones for Target Setting and Variations to Agreements: In
addition to extending the deadline for new entrant applications to 30 November 2020, the Government has confirmed an extension of the deadline for sector associations to submit counter proposals for target setting to 30 October 2020.
- Future Scheme: The Government acknowledges the views on the potential reform were there to be a future CCA scheme. The Government will look to confirm a timeline for further engagement on the future of the scheme shortly.
On 17 July, Department for Business, Energy and Industrial Strategy (BEIS), told all participating sectors that they would allow sectors to request an extension of the deadline to submit counter-proposals and that they would review the new entrant application deadline, noting the impact of COVID-19 on resource availability.
The deadline for sector associations to submit counter proposals for CCA target setting has been extended to 30 October 2020.
The new entrant deadline is confirmed in the Government Response as extended to 30 November 2020.
The Government response can be read in full here