How Climate Change Agreements (CCAs) work

What is a Climate Change Agreement?

Climate Change Agreements (CCAs) are voluntary agreements that can be implemented by energy-intensive sector organisations to help reduce their contribution to the Climate Change Levy (CCL).

There are two typed of CCAs:

• Umbrella agreements: These are negotiated energy efficiency targets set out by the Department of Energy and Climate Change and industry sectors. These are now umbrella agreements which are held between the Environment Agency and sector associations.

• Underlying agreements: This is an energy efficiency target for an operator for a site (or group of sites), that comes within a specific sector. These targets are appropriate for their organisation in relation to the umbrella agreement. As the sector associations manage the underlying agreements that comes within their sector, a business/operator must apply to the sector association if they wish to enter a CCA.

The CCA scheme is administered by the Environmental Agency for the UK. It is available for a wide range of industries and sectors.

How Climate Change Agreements (CCAs) work

Organisations must go through an application process for a CCA. Once accepted, they’re required to measure and report energy use and carbon emissions against an agreed target over 2-year periods. So far, these reporting stages have previously ended in 2015, 2017, 2019, 2021 and 2023.

The Climate Change Agreement reduces the amount of tax a business pays towards the Climate Change Levy. The percentage discount rate can provide 92% for electricity and 77% for liquified petroleum gas (LPG). Both gas and solid fuels are discounted at 89%. Some companies may be eligible for 100% relief such as manufacturing organisations within the mineralogical and metallurgical sectors.

Climate Change Agreement Scheme Extension

The current CCA scheme started in April 2013, and is set to end on 31 March 2025. This was following the extension which was announced in March 2023 of a new ‘Target Period 6’ from 1 January 2024 – 31 December 2024.

Will there be a CCA scheme after 2025?

Yes, the previous government announced plans to run a new six-year scheme from the beginning of 2025, running until the end of 2030. This decision has been reaffirmed by the new government. It has been decided that the first target period within the new scheme will start in January 2026, allowing enough time to implement the proposed policy changes.

Target period dates:

• Target Period 1: 1 January 2026 to 31 December 2026
• Target Period 2: 1 January 2027 to 31 December 2028
• Target Period 3: 1 January 2029 to 31 December 2030

Certification Period dates

• Certification Period 1: 1 July 2027 to 30 June 2029
• Certification Period 2: 1 July 2029 to 30 June 2031
• Certification Period 3: 1 July 2031 to 31 March 2033

With the current scheme ending in December 2024, there is a gap between the next target period. However, there will not be a gap between the certification periods as the current certification period was extended to March 2027.

Who is eligible for the CCA scheme?

Eligibility is determined by business process and the proportion of energy used for that process.

There is an extensive list of processes across various industries, all of which are not necessarily energy intensive.

The proportion of energy used for the process and directly associates activities (DAAs) must be a minimum of 70% (known as the 70:30 rule). With this in mind, in order for the used energy to be considered eligible, there is a set criterion. These include renewable and non-renewable sources, waste, energy from steam, oxygen and transport fuels.

More about the 70:30 rule

Here are the core principles of the rule:

• If an installation uses 70% or more of the site’s total primary energy (also known as reckonable energy), the operator can claim that all the site’s energy consumption qualifies as part of the eligible facility.
• If the installation uses less than 70% of the site’s primary energy, the operator can still claim the installation’s energy consumption. Additionally, they can claim the energy used by other activities on site, up to an extra 3/7ths of the installation’s energy consumption, as part of the eligible facility. In order to apply the 3/7ths provision, both the installation and the additional energy must be separately sub-metered. Furthermore, it’s also important to note that this additional 3/7ths energy cannot be added during the last two months of a Target Period within the CCA.

How can Consultiv Utilities help you with a CCA?

Our team have extensive experience in providing guidance on Climate Change Agreements, and the application process. Our objective is to take the pressure off you and provide a seamless service that will ultimately benefit your organisation.

Book a free consultation with our energy specialists – discuss how we can assist you with potential savings through a CCA.

We hope you have found this blog both interesting and valuable. Feel free to share your thoughts or questions on this via email at info@consultivutilities.com.

Need more information on the Climate Change Levy (CCL)?

As part of the UK’s Climate Change Programme, the government launched the Climate Change Levy (CCL) scheme in 2000. Consequently, this is a tax which is now on organisation’s energy and fuel bills.

See more information on the CCL here.