Climate Change Agreement (CCA)
A CCA is a voluntary agreement that allows businesses in high energy industries to receive a discount on the Climate Change Levy (CCL), an energy tax to non-domestic consumers in the UK, chargeable to both electricity and gas supplies.
The CCA scheme serves the dual purpose of incentivising energy and carbon savings through setting efficiency targets and reducing costs in energy-intensive sectors by providing a discount on the CCL. Extended until March 2025 by the Chancellor during the Spring Budget 2020, figures showed that participation was between 80% and 100% in participating sectors for eligible businesses, saving nearly £300 million annually.
Businesses that agree to be bound by a CCA are eligible for up to a 92% reduction on the CCL charged on electricity, and up to an 81% reduction on other fuels, including gas.
There are two types of CCA:
- Umbrella Agreement – agreed energy efficiency targets for a sector, held between the sector association and the Environment Agency. Examples of umbrella CCA holders include the Chemical Industries Association, British Plastics Federation and the Food and Drink Federation.
- Underlying Agreement – Held by a site, or group of sites, owned by an operator within a particular sector. This contains energy or carbon efficiency targets appropriate for their type of operation
Agreements are managed by sector associations, and an operator wishing to enter into a CCA must do so by applying to their respective association. In total, 53 sectors currently hold CCAs.
Organisations that enter a CCA will set carbon reduction targets over four, two-year target periods, measuring and reporting their energy use and emissions. Emissions data must be submitted to their sector association quarterly. Once the targets in a reporting period are met, a reduced rate certificate is supplied that lists facilities entitled to claim a discount.
When a target is not met, an operator may remain a participant in the scheme through a CO2e Buy-Out mechanism to account for the difference between performance and target. The buyout price beyond 2020 is under consultation but is expected to rise from the current £14/tonne to up to £18/tonne.