UK Government extends Climate Change Agreement tax breaks

The Department for Business, Energy and Industrial Strategy (BEIS) is extending its Climate Change Agreement (CCA) scheme for businesses by two years, following a consultation which highlighted its popularity.

UK Government extends Climate Change Agreement tax breaks

Longer-term reforms are expected to be consulted on in 2021

The CCA scheme launched in 2014 and provides businesses with tax breaks on the basis that they become more energy-efficient and reduce their Scope 1 (direct) and Scope 2 (power-related) emissions. It sets energy-reduction targets for businesses which, if met, result in a discount on the Climate Change Levy (CCL) on their energy bills.

The scheme was due to close in the first half of 2023 but will now be extended through to March 2025, after an eight-week consultation by BEIS revealed strong support for the scheme. Businesses in energy-intensive sectors gave evidence that the scheme would help them align with the UK’s new legally binding net-zero target, deadlined at 2050.

BEIS estimates that more than 700,000 tonnes of greenhouse gas (GHG) emissions have been mitigated annually since the CCA scheme opened. It is predicting that, between January 2021 and the new closing date, it will help businesses collectively save £300m in energy costs.

“This extension will save businesses money while cutting emissions – a key element of our work to combat climate change in the months and years ahead,” Energy Minister Kwasi Kwarteng said.

New members

BEIS has adopted the vast majority of the recommendations of the consultation, first launched at the 2020 Budget by Chancellor Rishi Sunak.

As such, it will also allow new businesses to join the CCA scheme for the first time since November 2018. Businesses wishing to join have until 30 November to apply and will be judged by the existing eligibility criteria.

Almost 9,000 facilities are currently benefitting from the CCA scheme.

The consultation response also confirms that civil servants will conduct a longer-term review of reforming or replacing the CCA scheme beyond 2025. Several businesses, think-tanks, trade bodies and green groups are calling for BEIS to update the list of eligible technologies and sectors more often in the future, in order to bring new solutions to the market and incentivise the uptake of ‘best-in-class’ practices.

“Responses highlighted that a future reformed scheme could help industry in the transition to net-zero, whilst supporting the competitiveness of businesses,” BEIS’s formal response to the consultation states.

Sarah George

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