What is a Climate Change Agreement (CCA)?
CCAs entitle eligible energy-intensive businesses to receive an 80% discount from the Climate Change Levy (CCL) in return for meeting binding energy efficiency or carbon saving targets.
By negotiating CCAs with over 50 industrial sectors, the Government aims to reduce UK greenhouse gas emissions while addressing industry concerns about international competitiveness.
CCAs have a two-tier structure:
- a sector-level agreement between DEFRA and the sector or trade association (known as an umbrella agreement)
- individual agreements between DEFRA and the operator of the facility (known as underlying agreements)
Which industries are covered by CCAs?
The CCA regulation covers these main energy-intensive industries:
- Aluminium
- Cement
- Ceramics
- Chemicals
- Food & drink
- Foundries
- Glass
- Non-ferrous metals
- Paper
- Steel
and over 30 smaller sectors.
Smaller sites that do not meet the size thresholds of the Pollution Prevention and Control (PPC) Regulations, but which otherwise would qualify, are also eligible for an agreement. Exceptions to this include combustion plants of greater than 50 megawatt (MW) capacity and the 3MW limit for burning of waste oil, recovered oil or fuel manufactured from or comprising waste.
What is the Climate Change Levy (CCL)?
The CCL is a charge on energy usage for business and the public sector designed to encourage businesses to reduce their energy consumption or use renewable energy sources.
The levy is imposed at the time of supply and is included in energy bills. Supplies for charity users and domestic use are excluded. All revenue raised through the levy is recycled back to business through a 0.3% cut in employer’s national insurance contributions and support for low carbon technologies and energy efficiency. Measures include a 100% first year capital allowance for specified energy saving investments.
Which supplies are taxable under the CCL?
- Electricity
- Natural gas supplied by a gas utility
- Petroleum and hydrocarbon gas in a liquid state
- Coal and lignite
- Coke, and semi-coke of coal or lignite
- Petroleum coke
Which supplies are not taxable under the CCL?
- Oil
- Road fuel gas
- Heat
- Steam
- Low value solid fuel (< £15 per tonne)
- Waste as defined in statute
For the latest levy rates, click here for the HM Revenue and Customs website
Which supplies are exempt from the CCL?
- Electricity generated from renewable energy (eg. solar and wind power)
- Fuel used by good quality combined heat and power (CHP) schemes and certified via the CHP Quality Assurance Programme CHPQA
- Fuels used as a feedstock
- Electricity used in electrolysis processes, for example, the chlor-alkali process, or primary aluminium smelting.
The Government recognised that the levy could adversely affect energy-intensive industries exposed to international competition and introduced Climate Change Agreements (CCA).
Latest developments
On 12 March 2009, the Department of Energy and Climate Change (DECC) launched a consultation on the form and content of new Climate Change Agreements following the Government's decision to extend the scheme (subject to state aid approval) until 2017.
The Government has reviewed the current Climate Change Agreements with a view to simplifying them for the benefit of business and government and to achieve greater coherence with other relevant climate change policy.
Click here for latest developments in legislation
Key points at a glance:
- Climate Change Agreements (CCA) entitle eligible energy-intensive businesses to receive an 80% discount from the Climate Change Levy (CCL) in return for meeting binding energy efficiency or carbon saving targets.
- The CCL is a charge on energy usage for business and the public sector designed to encourage businesses to reduce their energy consumption or use renewable energy sources.
- All revenue raised through the Climate Change Levy (CCL) is recycled back to business through a 0.3% cut in employer’s national insurance contributions and support for low carbon technologies and energy efficiency.