Climate Change Agreements – why your business should take action now to feel the benefit

Claire Markham, Director of Sustainable and Renewable Energy at Inspired Energy

At a time when businesses are seeking to reduce their OPEX costs wherever possible, the proposed reopening and extension of the Climate Change Agreement (CCA) scheme will be welcomed by many. But those that wish to secure an agreement – and benefit from the significant savings they bring – must act fast.

The CCA scheme, which enables eligible businesses to receive a discount of up to 92% on the electricity element of the Climate Change Levy (CCL) and 83% on the gas element, is currently set to end on 31st March 2023. However, it’s been so successful that the Government is now proposing to extend the scheme to March 2025, and they have already reopened the CCA to new applicants. It’s estimated that this extension will save businesses around £300m each year.

As the Government strives to rebalance gas and electricity CCL rates, the rate on gas will continue to rise over the next few years, which will increase energy bills for most businesses. This will make holding a CCA even more valuable.

While the extension and reopening of the CCA depends on the outcome of the Government consultation, eligible businesses must act quickly to ensure that they secure this discount if it is approved. The application window for new applicants closes on 30th September 2020, and some trade associations require submissions up to 4 weeks before this date, which means there’s limited time for businesses to submit their applications.

Next steps for new applicants

Businesses that think they might be eligible for a CCA should investigate whether their processes do indeed fall under the scheme’s criteria. A full list of eligible processes can be found in Appendix A of the CCA Operations Manual.

If their processes are eligible, then new applicants need to start gathering the information they need to apply for a CCA now, to ensure they can submit their application before the 30th September deadline. This includes information around:

  • the specific facility/facilities carrying out eligible processes
  • any environmental permits they hold (including existing or previous CCA or EU ETS permits)
  • the manufacturing process they use
  • the amount and type of energy they use
  • other activities directly associated with their eligible process that will have an effect on CO2 emissions

The CCA application process can therefore be complex and time-consuming for businesses, and with the coronavirus pandemic causing ongoing disruption for many organisations, it may not seem like the ideal time for businesses to take on extra admin. But the financial benefits of gaining a CCA can make such a substantial impact on an organisations’ energy bills that it’s vital for eligible businesses to apply.

Agreements require action

Securing approval to participate in the CCA scheme is just the first step in the process. If the Government’s proposal is approved, then the next target period will run between January 2021 and December 2022. This means that all applicants – new and existing – will need to be prepared to take action to achieve their agreed targets within this time period against a 2018 baseline, in order to secure their discount on the CCL between July 2023 and March 2025.

Savvy businesses will be putting plans in place now to ensure they make steady progress towards their target within the target period. There are a range of different targets businesses can work towards under a CCA, but they all involve either carbon or energy reduction. This means that any measures businesses put in place with the aim of achieving their targets should also help to boost their sustainability credentials. Those that are required to participate in the Streamlined Energy and Carbon Reporting (SECR) scheme should also be able to include any carbon or energy reduction measures they take to achieve their CCA target in their SECR reports.

Existing participants must be careful not to be complacent, as the proposal also includes plans to reset the baseline from 2008 to 2018, and increase the buy-out rate from £14/tCO2e to £18/tCO2e. This will mean that companies that have previously relied on early overperformance and buyouts will need to focus on taking action instead.

Seeking support in challenging times

Of course, for the many organisations that are facing reduced workforces and increased workloads due to Covid-19, preparing and submitting a CCA application within the next few months may seem unachievable – but that’s where the support of external experts can make a real difference.

By working with an energy consultant, businesses can benefit from the expertise of those who deal with energy compliance on a daily basis, which should streamline the CCA process and take the burden off their in-house team. Whether they choose to go it alone or seek external support, however, it’s crucial that businesses don’t delay in order to secure the substantial savings available for those with a CCA.