Government Update: Climate Change Agreement Scheme
Target Period 6 - Jan 2024-Dec 2024
Government Update
SUMMARY
Following the Government commissioned review in 2019 of the Climate Change Agreement Scheme and the subsequent Chancellor’s announcement in the Spring 20 Budget of a scheme extension, a further announcement was made in the Spring 23 Budget of a proposed further Target Period 6 (January 2024 – December 2024) with CCL relief extending up to 31st March 2027.
This announcement was accompanied by a consultation on this extension and further proposals on any potential future scheme and is open until 10th May 2023.
The information in the document summarises the Government’s proposals and lays out the details of this proposed extension and the timelines subject to agreement by both Sectors and Government.
OVERVIEW
The Government is not reforming the eligibility criteria for the extension but following the 2019 consultation is seeking views on their intended reform for a future scheme.
In line with the previous consultation any future CCA scheme beyond March 2027 will consider better delivered value for taxpayers’ money along with supporting the UK’s commitment to net zero.
A future scheme should help industry in the transition to net zero, whilst supporting the competitiveness of businesses and the need to support both energy efficiency and carbon savings, with simplification within the wider policy landscape.
EXTENSION DETAIL
ELIGIBILITY
There is no change to the current eligibility criteria for existing or new entrants for the extension.
NEW ENTRANTS
A window for new entrants to apply to join existing sector agreements will be open 1st May – 30th September 2023 with the Environment Agency expected to certify eligible new entrant facilities from January 2024. New entrants must have commenced the eligible process before the closing date.
BASELINE FOR TARGETS
The baseline period for existing operators is to remain the same as Target Period 5, 2018. This also applies to new entrants where possible. Where specific data for 2018 is not currently available, the oldest 12-month data may be used instead to estimate the baseline.
TARGET SETTING
Currently no target has been set but the proposed Target Period 6 start of 1st January 2024 will allow time for negotiations for agreeing sectoral targets and to implement the necessary legislative. Where required, the deadline for sector association counter proposals is 31st July 2023.
CARBON SURPLUS
Banked surplus carbon will not be allowed to be brought forward from Target Period 5.
BUY-OUT PRICE
The cost of carbon will increase to £25/tCO2e for Target Period 6. Target Period 5 buy-out remains at £18/tCO2e.
FINANCIAL PENALTY PRICE
The financial penalty price for penalties related to Target Period 6 to be increased in line with the carbon cost for the appropriate target period; the financial penalty will increase to be the greater of £500 or £25/tCO2e.
OTHER ASPECTS OF THE SCHEME
All other scheme rules and processes will be maintained for the extension.
FUTURE SCHEME
The responses to this latest consultation will be published in July 2023. This will allow the Government to evaluate any future CCA scheme.
NEW ENTRANTS
Due to some sectors potentially not agreeing their sector target commitments before the application window closes, it is advisable to discuss any potential application with the sector before submitting.
To avoid delaying the start of an agreement, it is recommended to submit the application and once sector targets have been agreed, the new underlying agreements will reflect any sector target changes.
EXISTING AGREEMENTS
The current underlying agreement application form in the CCA Register does not currently include fields for target period 6, but it is expected that following sectoral agreement, new underlying agreements to be updated between October and December.
NEXT STEPS
For existing operators there is no further action as they will automatically be included in the extended target period.
Where required Optimised can assist with completing new agreement Target Period 6 applications for new entrants.
KEY DATES
| DATE | ACTION |
|---|---|
| March 2023 | Target setting process letters sent to sector associations |
| 1st May 2023 | Applications for TP6 new entrants open |
| 10th May 2023 | Consultation closed |
| July 2023 | Government response published |
| June 2023 | Government to send letters to sector associations confirming target offer |
| 31st July 2023 | Deadline for sector associations to provide evidenced target counter proposal |
| 30th September 2023 | Deadline for new entrants to make applications |
| October 2023 | Department for Energy Security & Net Zero issue final target offers to sectors & instruct the Environment Agency to vary sector umbrella agreements |
| October - December 2023 | Sector associations distribute targets amongst participants for agreement with the Environment Agency |
WE CAN HELP
Where required Optimised can assist with completing new agreement Target Period 6 applications for new entrants.
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