Climate change agreements (CCAs) have been instrumental in helping energy-intensive industries across the UK reduce their carbon footprint by offering financial incentives to decarbonise their operations. As we move forward in addressing the challenges of climate change, understanding CCAs, their advantages, and the expected updates in 2025 is more important than ever.
As the landscape evolves, staying informed about policy updates is key; this article from Boxfish offers an expert overview of CCAs and their upcoming changes.
What Are Climate Change Agreements (CCAs)?
CCAs are voluntary agreements between energy-intensive industries and the UK government. They aim to encourage industries to reduce energy use and carbon dioxide (CO2) emissions in exchange for significant discounts on the Climate Change Levy (CCL) - a tax on energy delivered to non-domestic consumers in the UK.
Introduced in 2001, CCAs cover a wide range of sectors, including chemicals, food and drink, paper, and metals, among others. Each participating sector negotiates targets with the government, which are then distributed to individual facilities. Compliance with these targets determines eligibility for the CCL discount, which can significantly reduce operating costs for energy-intensive businesses.
Benefits of Participating in a CCA
- Cost Savings: The primary benefit of CCAs is the significant reduction in the CCL tax, with potential savings of up to 90% on the CCL for electricity and 65% for other fuels.
- Enhanced Energy Efficiency: By setting and striving to meet energy efficiency targets, companies can lower their overall energy costs and improve operational efficiency.
- Competitive Advantage: Businesses that demonstrate environmental responsibility through CCAs often enjoy improved reputations, which can attract environmentally conscious clients and investors.
- Contribution to Climate Goals: CCAs help businesses align with national and global climate targets, contributing to the UK’s net-zero ambitions.
Who Can Benefit From a CCA?
CCAs are specifically designed for energy-intensive industries that fall under eligible sectors. These include businesses with processes that consume significant amounts of energy or those that produce high levels of emissions.
To participate, businesses must:
- Belong to a sector with an agreed CCA sector target.
- Meet the eligibility criteria set out by the Environment Agency.
- Submit regular reports demonstrating compliance with their energy efficiency targets.
Key Changes to CCAs in 2025
As we approach 2025, several significant changes to the CCA scheme are on the horizon, reflecting the government’s commitment to more ambitious climate action:
- Extended Scheme Timeline
The CCA scheme, initially set to end in 2023, has been extended to March 2025. Businesses will continue to receive CCL discounts while working towards stricter energy efficiency targets, with the first new target period starting in 2026.
- Revised Targets
Starting in 2025, businesses will face stricter energy efficiency and carbon reduction targets, aligned with the UK’s net-zero emissions goal by 2050. Meeting these targets will ensure continued access to CCL reductions through 2033.
- Sector Reassessment
The government will reassess sector eligibility and targets, with some sectors facing additional scrutiny. Existing facilities will need to meet updated criteria to transition to the new scheme.
- Digital Reporting Improvements
The Environment Agency will enhance the digital reporting platform, making it easier for businesses to submit and track energy data, improving transparency and reducing administrative burdens.
- Alignment With Net-Zero Goals
The updated scheme will align more closely with broader net-zero policies, encouraging businesses to adopt renewable energy and innovative technologies to support the UK's decarbonisation efforts.
Preparing for the Changes
To stay ahead of these changes, businesses should:
- Review Current Performance: Evaluate current energy efficiency and emissions data to identify gaps and areas for improvement.
- Set Ambitious Goals: Anticipate stricter targets and develop long-term strategies that go beyond compliance to drive substantial emissions reductions.
- Invest in Technology: Explore energy-efficient technologies and renewable energy solutions to meet new requirements while enhancing overall sustainability.
- Engage With Industry Bodies: Collaborate with sector associations and consult experts to stay informed about policy updates and best practices.
- Streamline Reporting Processes: Prepare for digital enhancements by ensuring that energy data collection and reporting processes are accurate and up to date.
Conclusion
Climate Change Agreements remain a vital tool for energy-intensive industries striving to balance operational efficiency with environmental responsibility. The upcoming changes in 2025 mark a pivotal moment for participants to align more closely with the UK’s net-zero ambitions. By preparing proactively, businesses can continue to benefit from the scheme while contributing to the global fight against climate change.