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Any business owner who reads their electricity bill should recognise the term Climate Change Levy, the name given to the climate tax applied to a business’ energy bill. First introduced in 2001, the levy is designed to encourage businesses to reduce their carbon footprint and improve their energy efficiency. This year the rate on electricity is set at 0.775p/kWh and applies to businesses in the industrial, public services, commercial, and agricultural sectors. There are some exemptions, for example charities and schools. There’s also reduced rates for industries that sign up to Climate Change Agreements. In this blog, we'll delve into the intricacies of the CCL, its purpose, and how CCAs play a crucial role in this framework.
The Climate Change Levy (CCL)
The Climate Change Levy, introduced in 2001, is a tax levied on the usage of energy, including electricity, gas, and solid fuels. It serves as an economic tool to encourage businesses to become more energy-efficient and reduce their carbon emissions. The revenue generated from the CCL is reinvested in environmental initiatives, contributing to the UK's commitment to combat climate change.
Who Pays the CCL?
The CCL primarily impacts businesses and organisations across various industries, with few exceptions. It applies to companies operating in the industrial, commercial, agricultural, and public sectors. However, some energy-intensive industries are eligible for exemptions under Climate Change Agreements.
Climate Change Agreements (CCAs)
CCAs are voluntary agreements between the UK government and eligible energy-intensive sectors, which aim to reduce energy usage and carbon emissions. By signing a CCA, companies commit to meeting specific energy efficiency and emission reduction targets over a predetermined period, typically ten years.
CCA Exemptions
Companies that successfully negotiate a CCA with the government receive a substantial reduction in the Climate Change Levy that they would otherwise be required to pay. This reduction provides an economic incentive for these energy-intensive industries to invest in energy-saving technologies and practices.
As part of their CCA, companies have targets and are required to report on their progress, energy consumption, and their carbon emissions. If the business does not meet its targets during the term of its agreement, it will cease to receive the CCL reduction, which is currently set at 92% for electricity.
Who is Covered by CCAs?
The sectors covered by CCAs encompass a wide range of energy-intensive industries, including but not limited to:
1. Manufacturing and Processing: This category includes sectors like steel production, chemical manufacturing, and cement production, which have high energy consumption.
2. Mineral Products: Industries involved in the extraction, processing, and production of minerals such as cement, ceramics, and glass are eligible for CCAs.
3. Pulp and Paper: Paper and pulp production, due to its energy-intensive nature, is covered by CCAs.
4. Glass: Glass manufacturing industries, known for their significant energy demands, can benefit from Climate Change Agreements.
5. Foundries: The metal casting industry, known for its high energy requirements, is another sector covered under CCAs.
Energy Management and CCAs
CCAs are a great way for industries to save money on their electricity bills, while also encouraging investment in sustainable practices. As part of the agreement, businesses are required to report on their progress, which is where energy management comes in. With an energy management service, companies can have tailor-made reporting ready for submission to the government. At OAK Network we are experienced in providing our clients with compliance reporting. Our sensors capture the business’ consumption patterns, from a site overview down to appliance specific usage and our machine-learning algorithm allows us to give our clients tailored recommendations, from retrofits to upgrades, we can give our clients the best insight into energy efficiency – all based off their real-time data.
Climate Change Agreements stand as a vital component of the UK's strategy to combat climate change, offering targeted incentives to energy-intensive industries. By exempting these sectors from a portion of the Climate Change Levy, the government encourages them to adopt sustainable practices and invest in energy-efficient technologies. This not only benefits the environment but also contributes to the long-term sustainability and competitiveness of these industries.
As we move towards a more sustainable future, the role of CCAs in mitigating climate change cannot be understated. They represent a collaborative effort between government and industry, demonstrating the potential for meaningful progress when both parties work towards a common goal. Find out more about CCA’s and who qualifies on the government website here and don’t forget to get in touch with OAK Network to find out we can help you achieve your energy goals.
