In March 2016, the Chancellor announced plans to scrap the Carbon Reduction Commitment (CRC) scheme at the end of the 2018/19 compliance year. The catch? To maintain Government revenues, the Climate Change Levy (CCL) charge will rise by 45% from 1 April 2019.
The CCL charge is a tax on energy consumption. This is paid by non-domestic users. Its purpose is to provide an incentive for improved energy efficiency. Energy-intensive users can receive a discount on part of their CCL costs. This is done by entering into a Climate Change Agreement (CCA).
CCAs are a voluntary scheme, where participants receive a refund on their CCL charge. In exchange, they commit to various carbon reduction targets. The discount on CCL charges for electricity usage is currently 90%, and 65% for other fuels.
The tax relief available from CCAs will also increase from 2019 in line with the rising CCL costs.
From 1 April 2019, businesses will receive a 93% discount on electricity and 78% for other fuels.
However, some energy-intensive companies are in a ‘lose-lose’ situation as a result of these changes. Not all energy-intensive companies were part of the CRC scheme or the voluntary CCA arrangement. Therefore, when the CRC scheme is scrapped, they will be hit with increased CCL costs. They will also miss out on the cost refund available from CCAs.
Time for a CCA re-think?
Some energy-intensive companies calculated that the refund from CCL charges wasn’t enough to cover the administrative costs of entering into a CCA. However, with the changes outlined for 2019 it is worth re-assessing the value of having a CCA, especially as the Government has committed to running the scheme into 2023.
Businesses with a CCA monitor and report their progress on reducing energy and cutting carbon emissions over two-year target periods. From 2019, there will be just two target periods for businesses to meet. Companies cannot join the last target period, so the cut-off date for setting up a CCA is 31 October 2018.
Utilitywise can help companies in approved energy-intensive sectors get a full assessment of the benefits a CCA could bring to their business. Taking action now can help you avoid the cost increases and make a real difference to your organisation.
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