Can’t stand the heat?

To qualify for a Climate Change Levy discount, food manufacturers will have to make a commitment to improve energy efficiency by a targeted amount by the end of 2010. Edward Davey, Food and Drink Federation, on a just such a scheme.

The Climate Change Levy (CCL) was confirmed in the Chancellor’s March 2000 Budget, and will be charged to all commercial and industrial companies from April 2001. It applies to the purchase of electricity, gas, coal and LPG (oil is not subject to the CCL as it is covered by other Excise Duties). The exact impact depends on the price you are currently paying for energy and your mix of fuels. For a typical food manufacturing company, however, the Levy will increase energy costs by about 15%.

The Climate Change Levy is designed to be “fiscally neutral”. The government is reducing employers’ National Insurance Contributions by 0.3%, and it is expected that this and other measures will save the same amount of tax as the Levy raises. However, whilst the Levy as a whole may be fiscally neutral, it could place significant financial burden on energy-intensive manufacturing companies that employ few people in relation to energy used.

To help offset the financial impact, the Government is inviting energy-intensive industrial sectors to sign a “Negotiated Agreement”. The Government offers an 80% Levy discount in return for an undertaking that participating companies will make a minimum improvement in energy efficiency over the next 10 years. The level of improvement required by the Government varies between industrial sectors. All Negotiated Agreements are being set up with individual industrial sectors through the relevant Trade Associations.

The food and drink sector has numerous Trade Associations and a number of separate Negotiated Agreements are being set up. The FDF Agreement has been set up on behalf of the member Trade Associations and covers the sectors shown. Other food and drink sectors such as brewing and malting, dairy, primary meat/poultry and animal feeds are being dealt with under separate Negotiated Agreements.

To get your Climate Change Levy discount you will need to make a commitment to improve energy efficiency by a targeted amount by the end of 2010. The average reduction target for the whole of the FDF is 11.4% based on Specific Energy Consumption, although the targets for individual sites could vary considerably from this figure. You will be asked to sign a Participation Agreement with the DETR – this will show your target reduction and 2-yearly milestones by which your progress will be assessed. At the beginning of the Agreement you will receive an 80% discount for 2 years. You will be expected to submit energy and production data to the FDF Discount Scheme Administrator on an annual basis. At the first milestone (end of 2002) your improvement will be assessed and your discount will be renewed if you have managed to meet the milestone target. This 2-yearly assessment will continue until the end of the Agreement in 2012.

Eligibility for a Climate Change Levy discount is linked to the types of site that fall under the new IPPC Regulations. A key aspect of this definition is that the minimum size criteria defined in IPPC are ignored. In simple terms this means that any site that is manufacturing vegetable, meat or dairy products, irrespective of size, is eligible for a Climate Change Levy discount. Non-manufacturing sites owned by food and drink companies, such as offices, distribution depots, warehouses etc. are not eligible.

The Climate Change Levy Negotiated Agreement will focus company attention on any potential for energy efficiency improvement. This could even double the financial benefits, as the Levy discount is approximately equal to the energy saving.

To obtain details about the FDF Climate Change Levy Discount Scheme contact the Scheme Administrators on: tel: 0161 874 3668, fax: 0161 848 0181, or e-mail: Alternatively, visit the FDF Discount Scheme Web Site on

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