Have your say on a new 6-year Climate Change Agreements Scheme
The government has announced plans for a newly reformed CCA scheme for energy intensive organisations, coming into play in Q1 of 2025. A consultation on the design of the scheme is open until 14 February 2024, and proposes a few key differences. Here’s what you need to know.
What is the CCA scheme?
The first CCA scheme was first established in 2001, and reformed in 2013. It is a voluntary scheme which sets energy efficiency targets for businesses in eligible industrial sectors. In return, businesses that meet the target pay a reduced Climate Change Levy (CCL) rate on their energy bills. Participants can also see significant energy bill savings from the energy efficiency improvements they make towards these targets.
Why a new scheme?
The current CCA scheme targets end on 31 December 2024 (with reduced CCL rates available until 31 March 2027 for those who meet their obligations).
Energy efficiency policies come and go, but with 22 years under its belt, it is fair to say that the CCA has been a success. A government evaluation in 2020 showed that there is strong support from existing participants for a future CCA-style policy, and that it has achieved its two core objectives: improving the energy efficiency and competitiveness of participating firms.
The 2020 evaluation also revealed opportunities to improve and strengthen its impact – and the government hopes to address these via the newly reformed, scheme.
The new CCA scheme… what’s different?
The new six-year CCA scheme will have targets to the end of 2030 and provide CCL reduced rates for those meeting their obligations until March 2033.
Many fundamental aspects of the scheme will remain the same – and it will be developed using the existing scheme as a foundation.
However, (subject to consultation) there will be a few differences, we’ve outlined some of the key ones below:
- New entrants: New entrants will be able to apply to enter the CCA scheme at any time. The proposed start date for applications is 1 May 2024. However, the government is proposing that new entrants who join partway through a target period will be required to complete one Target Period before being certified to receive reduced rates of CCL.
- Eligibility: Energy and trade intensity remain as metrics to assess eligibility – and the thresholds remain the same. As before, sectors are eligible if either their energy costs amount to at least 10% of their production value (i.e. EI ≥ 10%); or amount to 3% or more but less than 10% of their production value so long as there is an import penetration ratio of at least 50% (i.e. 3% ≤ EI < 10% and IP ≥ 50%).
However, it’s important to note that existing participating facilities will not automatically be transferred to the new scheme. The administrator will assess each facility to ensure they meet existing eligibility criteria.
- New sectors: The government is proposing an opportunity for new sectors to provide evidence to support potential admission to the scheme. Any sectors that wish to make a proposal for a new sector/process to be added to the scheme should come forward to initiate the process of gathering sufficient information to determine if the process meets the above energy and trade intensity criteria.
- Annual reporting on the 70:30 threshold: Currently, the 70:30 rule means that if the eligible installation consumes less than 70% of the energy on site, participants can claim for energy used by other activities on site. This will remain, but the consultation seeks views on whether participants should make an annual confirmation in the scheme reporting that their facilities remain compliant with the threshold. This is to ensure better practice in how participants are monitoring this.
- Data gathering at a facility level: The government thinks facility level data to inform target setting would be beneficial for the scheme. To build a more representative and accurate picture of performance, this would involve facility level data from all participants. This would build upon the reporting of energy efficiency action previously undertaken by all participants within Target Period 6 of the current scheme and would be conducted prior to proposing new targets to each sector.
- Inclusion of UK ETS energy in reporting: the government believes that there are benefits to including UK ETS energy in CCA target energy reporting. Participants should report on the energy that is covered by UK ETS alongside CCA reporting, but that the CCA targets on which any buy-out is payable should continue to be based on energy that is not covered by the ETS. This will give a holistic view of the energy used across sites which is unavailable under the second CCA scheme.
- 2022 as the baseline year: The baseline year for the current scheme is 2018, but the consultation proposes to update this to 2022. One reason for this is that the UK ETS was launched in 2021; this would make 2022 an appropriate base year to account for the proposal to include UK ETS energy as part of CCA target setting.
- Extended reporting: the consultation includes a proposal for CCA participants to provide further evidence of energy efficiency and decarbonisation potential within the next 6 years, on a rolling basis, as part of their annual reporting.
Subject to consultation, the target and certification dates will be:
- Target Period 1 (indicative): 1 January 2025 to 31 December 2026
- Target Period 2: 1 January 2027 to 31 December 2028
- Target Period 3: 1 January 2029 to 31 December 2030
- Certification Period 1: 1 July 2027 to 30 June 2029
- Certification Period 2: 1 July 2029 to 30 June 2031
- Certification Period 3: 1 July 2031 to 31 March 2033
As the final certification period of the current scheme extension ends on 31 March 2027, the
certification period will be extended to 30 June 2027 to ensure there is no gap in certification before the first certification period of the new scheme.
A consultation on these aspects of the newly reformed scheme is open (you can have your say until 14 February 2024) – and it is set to launch in Q1 of 2025.
Existing participating facilities will not automatically be transferred to the new scheme – so it’s important to check that you meet existing eligibility criteria.
We can help you determine your ongoing eligibility, as well as helping you with your obligations under the current scheme. We’ll correctly measure and track your energy consumption and carbon emissions under the existing scheme. We’ll also produce your end of target period report.
New entrants should be able to apply from May 2024 – get in touch if you’d like support with your application.
For more advice on CCAs, get in touch with our team.