How to make the most of savings from Climate Change Agreements
Written by Tim Greenhalgh
Energy-intensive businesses can make big savings on costs by signing up to a voluntary Climate Change Agreement (CCA).
CCAs are helping businesses save around £300 million a year on energy costs. The expert team at SaveMoneyCutCarbon can help at all stages of the CCA process from initial energy survey and assessment to completing the application process, as well as ongoing support.
CCAs were launched seven years ago to encourage companies in energy-intensive sectors to lower carbon emissions while saving energy costs by giving discounts on the Climate Change Levy (CCL).
The CCL applies to industrial, commercial, agricultural and public-service sectors while excluding businesses using small amounts of energy and charities involved in non-commercial activities.
Energy intensive businesses can get a 90% reduction for electricity and a 65% reduction for gas, liquefied petroleum gas (LPG), coal and other solid fuel, by signing an agreement with the Environment Agency.
Identifying savings through better energy management is more important than ever for businesses. The Green Alliance reports that UK businesses are wasting £60 million a year in energy charges in their buildings.
How the CCA works
Your company will measure and report energy use and carbon emissions against a set of four 2-year target periods. The success of the scheme means that it should continue beyond the current end-date in 2025, so companies joining now will have the full benefits.
If you meet the targets, the Environment Agency will issue a reduced-rate certificate listing facilities that can claim a discount.
At the end of each 2-year target period, participants report on energy consumption and throughput data for every “target unit” to compare results to specific energy consumption target.
If a facility exceeds the target, the company can “bank” credits for the forthcoming period. In the event of missing a target, the company can use banked credits or, if none are available, purchase further credits to fill the gap.
Setting realistic and achievable targets is an important part of CCA planning. If you do not meet targets, there is a risk of penalties but also the cost of buying carbon credits is substantial. For example, the price of carbon under the EU Emissions Trading Scheme more than trebled since the start of 2018, rising from €8.16 to €26.48 in 2019.
Planning and administration become much more straightforward if companies have established energy/environmental management processes. By taking an overall view of energy management you can start to integrate the different elements of the CCA.
SaveMoneyCutCarbon provides comprehensive support for this and companies can benefit greatly by opting for the Pick and Mix solutions we offer.
For businesses in the Carbon Reduction Energy Efficiency Scheme (CRC), CCAs provide exemptions for the amount of allowances that need to be purchased, which is a further financial advantage.
Businesses running more than one operation in the same sector can either sign CCAs for each one or group them under a single CCA so that the target can be shared across all the units.
The levy is listed under charges in company energy bills.
In April, the Department for Business, Energy, and Industrial Strategy (BEIS) launched a two-month consultation on an extension to the CCA on extending the scheme beyond the initial closure date of March 2023 to March 2025.
Given the eight-year target periods, the Government is actively working with business sectors to extend the scheme further but there is an urgent need for companies to act now and apply for CCAs, with the current application deadline only three months away (September 2020).
It is not proposing to reform the eligibility criteria for the scheme or to substantially review existing rules and processes.
Government figures show that than 9,000 facilities currently benefit from the scheme, saving around 700,000 tonnes in CO2 emissions, a big benefit as 25% of carbon emissions come from the private sector.
At the same time, The CCA initiative has helped companies reduce energy use by up to 2.3TWh a year, which is equivalent to the annual energy consumption of 140,000 homes.
Types of CCA
There are two types of CCA – umbrella agreements and underlying agreements.
The government negotiated umbrella agreements with various sectors, setting energy efficiency targets for a sector – “the sector commitment”. The agreement is held between the sector association and the Environment Agency. Umbrella agreements also list the processes that are eligible for a CCA.
An underlying agreement is 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.
Sector associations manage the underlying agreements for businesses in their sector. An operator that wants to enter into a CCA must apply first to its sector association.
The CCA initiative is a central element in the Government’s drive to reduce greenhouse gas emissions quickly and sustainably as it moves towards the net-zero emissions goal for 2050.
Data from the Clean Growth Strategy points to potential savings of about £6 billon in energy costs with associated reductions in carbon emission of 22MtCO2 avoided up to 2030 by deploying cost-effective efficiency technologies.