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What is a Climate Change Agreement?

14 September 2016

If you have a Climate Change Agreement (CCA), you will be eligible for a discount on the Climate Change Levy (CCL) that you pay on your energy bills.  This blog will look at the CCL, CCAs and what they mean.

What is the Climate Change Levy?

The Climate Change Levy is a tax on energy that is paid through your energy bill.  The main CCL rate is paid on electricity, gas and solid fuels like coal and coke.  The levy applies to industrial, commercial, agricultural and public service sectors but doesn’t currently apply to domestic users and charities involved in non-commercial activities.  Some fuels are also exempt, for example, if the fuel will not be used in the UK or used in certain forms of transport.  The CCL rates are charged at a specific rate per unit of energy and changes on the 1st April annually.

For businesses using small quantities of fuel and power, they may be treated as a supply for domestic use, even if they are a business and therefore exempt from the levy.  There are different limits for different fuel types but piped gas must be less than 4,397 kilowatt hours a month and metered electricity not exceeding 1,000 kilowatt hours per month.

Can I get a discount on my CCL?

Yes.  Sites with a Climate Change Agreement are eligible to receive a CCL discount.  Climate Change Agreements are voluntary agreements made by UK industry and the Environment Agency, who administers the scheme in the UK.  Many industry sectors are eligible for CCAs and there are two types – umbrella agreements and underlying agreements.

How do CCAs work?

Umbrella agreements are negotiated with industry and Government departments to agree energy efficiency targets for a sector.  Once agreed, the agreement is held between the sector association and the Environment Agency.  An underlying agreement is held by a site, or group of sites owned by an operator within a particular sector and contains energy or carbon efficiency targets for their operation type.  Sector associations manage underlying agreements for businesses in their sector and so, an operator entering into a CCA must apply to its sector association.

The current CCA scheme runs until March 2023, having started in 2013.  Operators with a CCA must measure and report energy use and carbon emissions against the agreed targets over four and two-year periods.  If an operator has multiple sites in the same sector, they can be grouped together to share the target.

If a facility, or group of facilities with a CCA meets their targets at the end of the reporting period, it is eligible for the CCL discount.  This is a 90% discount on electricity bills and 65% on other energy and power sources.

For energy intensive businesses, power bills can be very expensive.  However, that means there are a lot of opportunities for saving money.  The Climate Change Levy is a tax applied to energy consumed by most businesses.  For eligible businesses, having a Climate Change Agreement can be an encouragement to improve efficiencies and derive an additional commercial benefit.  Do you have a Climate Change Agreement, or do you think you might be eligible for one?

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