By Paul Busfield, Principal Consultant, Carbon Architecture
In October 2024 the UK Government finally unveiled its response to the Climate Change Agreements (CCA) scheme consultation, marking a significant milestone in the nation’s commitment to industrial decarbonisation and sustainability.
Published on 16th October, this long-awaited announcement provides more clarity for businesses about the future of this environmental initiative. So, what’s changing, and what does it mean for businesses?
In a positive move for energy-intensive industries, the Government has confirmed the introduction of a new six-year CCA scheme. Set to commence on 1st January 2026 and run until the end of 2030, this scheme enables businesses to benefit from reduced Climate Change Levy (CCL) rates until March 2033.
However, this isn’t just a simple extension of the current scheme. Instead, it’s a comprehensive update to the CCA framework, with several key changes that businesses need to prepare for.
Enhanced reporting requirements
One significant change in the new scheme is the move to what’s known as ‘facility-level reporting.’ Instead of reporting data as a collective, each site or facility within a business will now report individually. This change allows for a more precise understanding of each site’s energy use and where improvements can be made.
Each facility will report against an “adapted Novem type target,” which might sound technical but is simply a way to measure energy use based on the specific demands of each facility. It considers both the base energy required to keep operations running (fixed energy) and the energy needed for production processes (variable energy). This approach means targets are realistic and tailored to the needs of each area of the business, enabling better planning and achievable energy-saving goals.
To support robust target-setting, a sample of facilities will be required to provide additional data, ensuring the targets reflect current business realities. Participants must also complete annual self-certification against the ‘70/30 rule’ – a straightforward guideline confirming their eligibility for the scheme by tracking energy-saving measures.
Updated baseline and carbon factors
A new baseline year of 2022 will be used for performance measurement, giving businesses a recent benchmark to track their improvements. Although carbon emission and primary electricity factors will be updated before the scheme’s launch, they will remain fixed for the scheme’s duration, providing stability and predictability for long-term planning.
Importantly, for businesses using self-generated electricity, the primary electricity factor (a multiplier used to convert the amount of electricity consumed into an equivalent measure of primary energy or emissions) will be reduced to 1.
Considerations for UKETS businesses
For businesses under the UK Emissions Trading Scheme (UKETS), the new CCA scheme requires energy usage to be reported, though this will not affect performance targets or buy-out fee calculations. Businesses using Combined Heat and Power (CHP) systems within UKETS will follow a specific reporting method, ensuring accurate data collection and fair compliance.
Financial mechanisms
The CCA scheme also introduces a dynamic approach to buy-out pricing, with rates set at the beginning of each target period and adjusted to reflect the weighted average of CCL rates. This adjustment ensures that costs remain relevant to current energy prices. Additionally, for businesses that exceed their targets, any surplus can be carried forward to future target periods, rewarding high performers for their efforts.
Getting involved: timelines and compliance
New entrants from existing sectors can apply between 1st May and 31st August 2025. This window should give enough time for thorough assessment and processing ahead of the scheme’s launch. As in the previous scheme, the Environment Agency will monitor compliance, with the authority to enforce penalties for non-compliance. HMRC will also continue to oversee tax compliance related to the CCL discounts.
This reformed CCA scheme represents a valuable opportunity for UK businesses to align their operations with the nation’s net-zero ambitions while benefiting from reduced CCL rates.
For businesses considering participation or seeking guidance on their obligations under the new scheme, now is the time to prepare. Early engagement will be essential to a smooth transition and to make the most of the benefits available.
My advice is to get in touch with our team of specialists, we’re here to support you with CCA compliance or to explore your eligibility, don’t hesitate to contact us.
