Climate Change Levy discount of 90% on offer to energy intensive businesses that achieve new 2020 emissions targets

The discount, which took effect from 1 April under new regulations, will be available to energy-intensive businesses that meet targets set under Climate Change Agreements (CCAs) with the Government. The regulations increase the discount from 65% to 90% of the CCL imposed on electricity use for those businesses that meet the CCA targets. They will also be entitled to a discount of 65% of the levy imposed on gas, solid fuels and liquefied petroleum gas.

The Department of Energy and Climate Change (DECC) announced revisions to the CCA scheme this week which will see energy intensive businesses seek an 11% improvement in their energy efficiency by 2020. The CCA scheme, which is available to heavy energy users in 51 different sectors including steel, aerospace and farming, sets  additional carbon reduction targets for those businesses to achieve in exchange for reductions on the CCL for those businesses that meet their targets.

In last month's Budget announcement, the Chancellor said that energy used by the ceramics industry and by businesses involved in other "metallurgical and mineralogical processes" would be exempted from the CCL from 1 April 2014. The Government intends to publish draft legislation to give effect to this exemption alongside the Autumn Statement later this year. It is also due to confirm the details of a £250 million compensation package for those energy intensive businesses worst affected by the EU's Emissions Trading Scheme shortly.

"The introduction of the new package of targets has largely been welcomed by the business community," environmental law specialist Simon Colvin of Pinsent Masons, the law firm behind Out-Law.com, said. "It follows an extended period of flux whereby we have seen the regulation of CCAs move from DECC to the Environment Agency. We have also seen the introduction of some certainty concerning the interaction between CCAs and the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme, with energy consumption covered by CCAs effectively excluded from consideration under the CRC Scheme."

"One area where there will continue to be some uncertainty follows George Osborne’s announcement that certain sectors will be fully exempt from the CCL for competition reasons," Colvin said. "This proposal needs to be worked through as to how it will work in practice, however, it does at least show the Government is willing to listen to the business community and is on occasion able to react to its needs."

"Those who have to work with CCAs will know they are still a very complicated approach to something that can surely be simplified further," he added. "We have seen with the introduction of the Environmental Permitting regime, a single scheme to regulate the majority of activities that have the potential to have a detrimental impact on the environment. A similar approach whereby there is a single regime, as opposed to multiple regimes – the EU Emission Trading Scheme, the CCL, and the CRC –  to greenhouse gas emissions should be the goal for the regulatory authorities. I won’t hold my breath!"

The CRC scheme requires large businesses and public sector bodies to report on their energy consumption and buy carbon dioxide allowances to cover that consumption.