Updated Oct 2, 2020

Climate Change Agreement Scheme extended till 2025

The Department for Business, Energy and Industrial Strategy (BEIS) has announced that they have extended the Climate Change Agreement Scheme for a further two years, until March 2025.

What is the Scheme?

Climate Change Agreements are voluntary agreements made by UK industry and the Environment Agency to reduce energy use and carbon dioxide emissions.

In return, operators receive a discount on the Climate Change Levy, a tax added to electricity and fuel bills. The Environment Agency administers the Climate Change Agreement Scheme on behalf of the whole of the UK.

Climate Change Agreements are available for a wide range of industry sectors from major energy-intensive processes such as chemicals, paper and supermarkets to agricultural businesses such as intensive pig and poultry farming.

Original Consultation

BEIS originally consulted on a proposed extension to the Climate Change Agreements Scheme, and on potential reforms, back in April 2020, with responses required by June.  

101 responses were received, with a large majority welcoming the extension and the new proposals. Many felt that the proposals were appropriate for extension as these followed similar patterns of previous periods, and there was broad support for maintaining existing rules and eligibility criteria as this provided consistency for operators during a time of economic uncertainty.

The Government decided, as a result, to implement the changes.

New arrangements

The following decisions have been adopted, as a result of the responses received to the Consultation:

1. Target period and certification dates - the current Climate Change Agreement Scheme will be extended by two years, through:

  • the addition of a new target period, from 1 January 2021 to 31 December 2022;
  • extending certification for reduced rates of Climate Change Levy for participants meeting obligations under the Scheme to 31 March 2025.

2. Eligibility - the current eligibility criteria will be maintained for the extension.

3. New entrants - will be allowed to apply to join existing sector agreements, with the Environment Agency expected to certify eligible new entrant facilities from January 2021. The deadline for applications is extended to 30 November 2020.

4. Baseline for targets – the baseline period is to be updated. Where discrete data for 2018 is not currently available, appropriately adjusted Target Period 3 (covering 2017 and 2018) data may be used instead to estimate a 2018 baseline.

5. Target setting – the process for agreeing sectoral targets will remain as proposed, although the deadline for counter proposals can be extended up to 30 October 2020, if required.

6. Surplus – will not be allowed to be brought forward to use in the added Target Period 5.

7. Buy-out price – will increase to £18/tCO2e for Target Period 5. Target Period 4 buy-out remains at £14/tCO2e.

8. Financial penalty price – there is an increase to the financial penalty price for penalties related to Target Period 5 in line with the buy-out cost per tCO2e for the appropriate target period; the financial penalty will increase to be the greater of £250 or £18/tCO2e.

In addition, all other Scheme rules and processes will be maintained for the purpose of this extension.

For more information, see the:

  • Finance Act 2000;
  • Climate Change Agreements (Administration) Regulations SI 2012/1976;
  • Climate Change Agreements (Eligible Facilities) Regulations SI 2012/2999;
  • Climate Change Agreements (Administration and Eligible Facilities) (Amendment) Regulations SI 2020/958.