Updates

The Climate Change Agreements (Administration and Eligible Facilities) (Amendment) Regulations 2023

  • Legal

Jurisdiction: United Kingdom

Commencement: 31st December 2023

Amends: 

  • The Climate Change Agreements (Eligible Facilities) Regulations 2012
  • The Climate Change Agreements (Administration) Regulations 2012

Mini Summary

The Climate Change Agreements (Eligible Facilities) Regulations 2012 revoke, replace and consolidate with some amendments the Climate Change Agreements (Eligible Facilities) Regulations 2001, the Climate Change Agreements (Eligible Facilities) Regulations 2006, the Climate Change Agreements (Eligible Facilities) (Amendment) Regulations 2006 and the Climate Change (Eligible Facilities) (Amendment) Regulations 2009.

This legislation sets out the eligibility criteria for facilities wishing to enter into Climate Change Agreements (CCAs) in order to receive a discount on their Climate Change Levy (CCL). The CCL is a tax on electricity, natural gas, liquefied petroleum gas and solid fuels (taxable commodities) supplied to the business and public sectors.

The CCA scheme was introduced in order to allow certain energy intensive businesses to pay a reduced rate of CCL in return for entering into sector-specific energy efficiency agreements. The CCA discount meant that companies in a CCA paid only 35% of the CCL however as of 1st April 2013 this rate is being reduced to 10% on electricity (the rate of CCL on gas, LPG and solid fuels will remain at 35% of the main CCL rates).

The 2012 Regulations are a consolidation of the previous Regulations and as a consequence the CCA regime remains largely the same. There are, however, two significant amendments to the eligibility criteria, meaning that companies should check their eligibility.

The amendments change the 90% rule and the remove the energy intensive criteria that applied for entry into a CCA.

The Environment Agency took over from DECC as the administrator of the CCA scheme on 1st October 2012 and will perform this role until 2027.

The Climate Change Agreements (Administration) Regulations 2012 transfer the administration of the Climate Change Agreement (CCA) scheme from DECC to the Environment Agency.

They set the Environment Agency’s powers and duties as administrator of the scheme and they will apply to CCAs which are entered into after 1st October 2012.

Having the Environment Agency administer CCAs brings the scheme in line with the EU Emissions Trading System (ETS) and the CRC Energy Efficiency Scheme. Subject to approval the new CCAs will be set at 90% relief from April 2013 and will run until March 2027.

The amendments stem from Section 207 and Schedule 31 of the Finance Act 2012 which transfer the administration of the CCA scheme in respect of any CCAs entered into after the date Finance Act 2012 came into force from the Secretary of State to an administrator. The Finance Act 2012 also conferred powers on the Secretary of State to make regulations on the administration of the new scheme including the powers and duties of the administrator relating to new aspects of the scheme, including:

  • terms to be included in a CCA that mean that a lack of progress towards meeting targets may be made up for by the payment of a fee;
  • the imposition of financial penalties; and
  • circumstances in which a CCA can be terminated.

The CCAs will also contain provisions about the obligations of participants in the scheme, when a facility covered by an agreement may be certified, how the buyout fee will be operated, how an agreement may be varied, and further rights of appeal in respect of decisions made under the CCAs.

Duties

Various duties apply.

 

Amendment

The Climate Change Agreements (Eligible Facilities) Regulations 2012

The Climate Change Agreements (CCAs) scheme has been extended. Intended to end on 31st March 2025, it will now run until 31st March 2027.

The Climate Change Agreements (Administration) Regulations 2012

The Climate Change Agreement (CCA) scheme is extended until 31st March 2027.

Key changes
The main changes introduced by this Amendment are as follows.

  • A new target period (TP6) is introduced from 1st January 2024 to 31st December 2024.
  • The buy-out fee* for TP6 is increased to £25 per tonne of CO2 that exceeds the target.
  • No surplus** previously accumulated by participants is considered in relation to TP6.

*Participants may, if they fail to achieve the emissions reduction target, pay a buy-out fee.

**Surplus means the amount by which the reduction in emissions has exceeded the target.

Mandatory disclosure
Participants in the CCA scheme must provide information on actions that have been taken to meet the target upon request.

Penalties
The maximum financial penalty is increased from £250 to £500.

However, the scheme administrator is given discretion to:

  • withdraw a financial penalty;
  • impose a lower amount; or
  • allow additional time for payment of the penalty.

For financial penalties issued after 31st December 2023, the administrator must publish:

  • the name of the operator;
  • the amount of the penalty imposed; and
  • a description of the contravention that led to the imposition of the penalty.

These Regulations come into force on 31st December 2023.

Link to full government text

 

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