climate change Archives - The Compliance People

Jurisdiction: United Kingdom

Commencement: 14^th October 2024

Amends: Climate Change Act 2008
Mini Summary

The Climate Change Act 2008 sets a target for the UK to reduce its greenhouse gas emissions and sets up the framework for this to be achieved. There are no direct compliance duties for organisations under this Act; however secondary legislation may be applicable.

Duties

The Act does not have any direct duties on organisations; however, they may be affected by secondary legislation. It is the duty of the Secretary of State to ensure that the UK reduces its greenhouse gas emissions by the targeted amount.

Part 1 – Carbon target and budgeting

A duty is put on the Secretary of State to reduce UK greenhouse gas emissions to at least 80% below the 1990 baseline by 2050. In addition, carbon budgets must be set for each 5-year period, starting 2008-2012. Reports must be made to Parliament on the UK emissions levels and the measures the Government will take to meet the carbon budgets. The carbon budget for 2018-2022 must be consistent with the target to reduce greenhouse gas emissions by 26% below the 1990 baseline by 2020.

Part 2 – The Committee on Climate Change

This establishes the Committee on Climate Change as an independent, non-departmental body to advise the Secretary of State. The Committee must make an annual report to Parliament on the progress made to meet the carbon targets and budget set in Part 1.

Part 3 – Trading schemes
Part 3 includes powers to enable the Government to introduce new trading schemes related to greenhouse gas emissions to be set up via secondary legislation.

Part 4 – Impact of, and adaptation to, climate change
The Secretary of State has a duty to carry out an assessment of the risks to the UK from the impact of climate change and provide reports every 5 years.

Part 5 – Other provisions
Other measures for the reduction of greenhouse gases are introduced, including for pilot waste reduction schemes, for regulations to be made relating to single use carrier bag charges, provisions to enable a renewable transport obligation scheme to be established under the Energy Act 2004, and for carbon emissions reduction targets to be set.

Part 6 – General supplementary provisions

This describes the territorial scope of provisions in the Act.

Amendment

The Secretary of State’s response to the Committee on Climate Change (CCC) Report for 2024 must be presented to Parliament by 19th December 2024, as required under section 36 of the Act.

A copy of the CCC’s 2023 Report to Parliament can be accessed here.

There are no duties for organisations.

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ISO management system standards, are you considering climate change?
In February the International Organization for Standardization made the decision to add two new statements under Clause 4 in 31 international management system standards, including ISO 9001:2015, ISO 14001:2015, ISO 45001:2018 and ISO 50001:2018.

The amendment is identical in each separate standard requiring the consideration of the impact of climate change on the results of the management system.
What has changed?
Changes have been made to Clause 4 to add 2 statements, putting emphasis and providing clarification surrounding climate change considerations:

The changes have been published initially as an amendment to the current standard. We recommend downloading the relevant amendment document, which are available free of charge, and saving it with a copy of the standards to ensure the documents are up to date.
What does this mean for your organisation?
As organisations are already required to consider internal and external issues that can impact the effectiveness of their management system the requirements are mainly unchanged as climate change should already be considered. Organisations must now demonstrate that they have made clear considerations and provide evidence regarding climate change and how it is relevant to their management systems.

Certified organisations will be expected to know about and understand the implications of the published amendment. If your organisation already holds certification, you will not need a new certificate issued, as the amendments are being treated as a clarification rather than a new requirement under each standard.

When auditing, UKAS will expect certification bodies to apply the principles of the amendment and look for evidence that climate change has been considered under Clause 4.

The Department of Agriculture, Environment and Rural Affairs is responsible for issuing guidance for the reports.

CBAM has been introduced as a complement to EU and UK ETS, in order to “put a fair price” on carbon emitted during the production of intensive industrial goods, such as the aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron and steel sectors. This is done by reporting emissions and buying CBAM certificates to cover those emissions.

Importers will be required to pay a price on imported goods from a third country to cover the emissions as though they had been produced under the EU pricing rules. If a non-EU importer can show they have already paid a carbon price, then that price will be deducted from the costs to the EU importer.

The goal of the scheme is to help tackle climate change and to try and prevent carbon leakage*.

*Carbon leakage is where a manufacturer moves production to another country with a lower carbon price or less stringent emissions regulations.
Application
The mechanism is currently in a transition phase in the EU. This means that any organisation that imports eligible goods* into the EU must report the following information every quarter.

*Eligible goods for this phase are from the cement, iron & steel, aluminium, fertilizer, electricity, and hydrogen sectors. A list of the eligible sectors and associated guidance can be found here.

The full scheme, including requirements to pay for certificates will only fully come into effect in the EU by 2026.

The UK is also aiming to implement UK CBAM by 2027, with consultations on the design and delivery of the scheme happening later this year. There are no current requirements under UK CBAM, however, applicable organisations are encouraged to start collecting data for reporting.
Current emissions trading systems
There are current trading systems in place, namely the EU and UK ETS, which operate through the trading of emissions allowances between organizations using a ‘cap and trade’ system. They also include free allowances for organisations who are at risk of carbon leakage in order to keep production in the country.

CBAM differs from an emissions trading scheme in that there is no trading system between organisations. It also aims to phase out free allowances from 2026 as CBAM will apply if they import goods into the EU, regardless of where they are located.

CCA extension
The Climate Change Agreements (CCAs) scheme, initially set to end on 31^st March 2025, is now extended until 31st March 2027. The scheme is administered by the Environment Agency (EA).

About CCAs
Climate change agreements are voluntary agreements between organisations in the UK industry sectors and the Government. Scheme participants enter into an agreement to reduce their energy use or emissions and, in exchange, will pay a reduced rate of Climate Change Levy (CCL). The current CCL discount is 90%.
Compliance
Scheme participants can remain compliant with the CCA scheme by:

*Scheme participants may, if they fail to achieve the energy efficiency or the emissions reduction target, pay a buy-out fee, which is calculated per tonne of CO2.

Key Changes
The extension to the CCA scheme brings a number of changes, such as:

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

However, the scheme administrator is given discretion to waive or reduce the amount of financial penalty, or to allow extra time for payment, where appropriate.

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

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 1^st 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 1^st 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.

The Climate Change Agreements (Eligible Facilities) Regulations 2012

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

The Climate Change Agreements (Administration) Regulations 2012

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

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

A new target period (TP6) is introduced from 1^st January 2024 to 31^st 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 31^st 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.

Duties
Part 1 – Carbon target and budgeting
A duty is put on the Secretary of State to reduce UK greenhouse gas emissions to at least 80% below the 1990 baseline by 2050. In addition, carbon budgets must be set for each 5-year period, starting 2008-2012. Reports must be made to Parliament on the UK emissions levels and the measures the Government will take to meet the carbon budgets. The carbon budget for 2018-2022 must be consistent with the target to reduce greenhouse gas emissions by 26% below the 1990 baseline by 2020.

Part 2 – The Committee on Climate Change
This establishes the Committee on Climate Change as an independent, non-departmental body to advise the Secretary of State. The Committee must make an annual report to Parliament on the progress made to meet the carbon targets and budget set in Part 1.

Part 3 – Trading schemes
Part 3 includes powers to enable the Government to introduce new trading schemes related to greenhouse gas emissions to be set up via secondary legislation.

Part 6 – General supplementary provisions
This describes the territorial scope of provisions in the Act.
Amendment

The Secretary of State’s response to the Committee on Climate Change (CCC) Report for 2023 must be presented to Parliament by the 31st October 2023, as required under section 36 of the Act.
A copy of the CCC’s 2023 Report to Parliament can be accessed here.

There are no duties for organisations.

Link to full government text

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The Climate Change Act 2008 establishes a framework to reduce greenhouse gas emissions in the UK, to help move towards a low carbon economy and meet the targets set in this Act. This Act covers the UK; however Scotland has also made the Climate Change (Scotland) Act in addition to this.
Duties
The Act does not have any direct duties on organisations; however, they may be affected by secondary legislation. It is the duty of the Secretary of State to ensure that the UK reduces its greenhouse gas emissions by the targeted amount.

Part 1 – Carbon target and budgeting
A duty is put on the Secretary of State to reduce UK greenhouse gas emissions to at least 80% below the 1990 baseline by 2050. In addition, carbon budgets must be set for each 5-year period, starting 2008-2012. Reports must be made to Parliament on the UK emissions levels and the measures the Government will take to meet the carbon budgets. The carbon budget for 2018-2022 must be consistent with the target to reduce greenhouse gas emissions by 26% below the 1990 baseline by 2020.

Part 3 – Trading schemes
Part 3 includes powers to enable the Government to introduce new trading schemes related to greenhouse gas emissions to be set up via secondary legislation.

Part 6 – General supplementary provisions
This describes the territorial scope of provisions in the Act.

Amendment

Summary
This Act came into force on 6th June 2022 and applies to Northern Ireland only. It includes a net-zero target by 2050 as well as transitional greenhouse gas (GHG) emissions targets for 2030 and 2040. The Act also sets out a carbon budgeting framework, provisions for reporting against emissions targets and carbon budgets, and the appointment of a climate change commissioner.
Duties
There are no compliance duties for organisations under this Act, however, secondary legislation may be applicable.

Part 1 – Emissions targets and sectoral plans
Part 1 of the Act lists the GHG emissions targets, as outlined below.

This part of the Act also contains some information on plans to meet the emissions targets for the following sectors (sectoral plans).

Part 2 – Carbon budgets
Part 2 lays out the details on the setting of carbon budgets* by DAERA for each budgetary period** at levels consistent with meeting the emissions targets for 2030, 2040 and 2050.

*Carbon budget is a term used to refer to the maximum amount of carbon dioxide (CO2) emissions allowed over a period of time, to limit global warming to 1.5 degrees Celsius.

**The budgetary periods, for the purposes of this Act, are 2023 to 2027 and each period of 5 years after that.

DAERA must set the carbon budgets for the first 3 budgetary periods (2023 to 2027, 2028 to 2032, and 2033 to 2037) before the end of 2023, and at least 12 years before the start of the budgetary period for any subsequent budgetary periods, i.e. the carbon budget for the 4th budgetary period (2038 to 2042) needs to be set by 2026.

DAERA may also decide to transfer a part of the unused carbon budget back to the preceding budgetary period, or forward to the next budgetary period, as detailed in Section 28 (Carrying amounts from one budgetary period to another).

Part 3 – Reports and statements against targets and budgets
The proposals and policies for meeting the carbon budgets and emissions targets are set out in Part 3 of the Act. This part also includes ‘Just Transition’ clauses, including a ‘Just Transition Fund for Agriculture’*, to support the sectors through the changes brought by the Act, and to avoid causing them a disadvantage such as being unfairly penalised.

*The ‘Just Transition Fund for Agriculture’ is a fund inspired by the ‘Just Transition Fund‘ developed by the Scottish Government, designed to help the agricultural sector in Northern Ireland to contribute to the delivery of the climate action plans (more information on the fund is available in Section 31).

Part 4 – Reports by Committee on Climate Change
Part 4 provides details on the reports the Committee on Climate Change* must send to DAERA in relation to the progress made to meet the carbon budgets and the emissions targets.

*The Committee on Climate Change is an independent, non-governmental body established under Part 2 of the Climate Change Act 2008 to give advice to the Government on meeting the emissions targets, and to report on the progress of reducing GHG emissions.

Part 5 – Further oversight
This part establishes the Northern Ireland Climate Commissioner as an independent office to oversee and report on the operations of the Act, and states a commitment to developing a climate action plan within 2 years from the day the Act came into effect.

Part 6 – Supplementary
This provides some extra information in relation to the provisions of the Act such as duties to ensure targets are met and regulation-making powers.

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