New targets and extension for Climate Change Agreement

03/02/25

Following a three-month consultation, the government has confirmed the Climate Change Agreement (CCA) scheme will be extended for a further six years, with reduced Climate Change Levy (CCL) rates running until March 2033.

Towards net zero

The voluntary CCA scheme was established in 2001. Its aim was to make energy and carbon savings, through set energy efficiency targets. It also helps to reduce energy costs in certain eligible industrial sectors, by providing qualifying businesses with access to significantly reduced rates of Climate Change Levy (CCL) on their monthly energy invoices. These tax savings are intended to encourage investment in lower energy usage or decarbonisation measures.   

Target periods

The government set sector and organisational targets to provide a basis for businesses to make improvements to the energy-efficiency of their qualifying facilities over a set period. The targets under the previous CCA scheme ended on 31 December 2024, with the certification period until 31 March 2027.  A certification period is the term you can claim CCL relief until.  Organisations will be automatically re-certified if they meet their target.  Alternatively, if they fail the reporting period, they are required to purchase the equivalent amount of carbon emissions to continue in the scheme or choose to be removed from the scheme and surrender any future CCL discounts. 

For the new scheme, the start date of the first Target Period will be 1 January 2026, with 2025 being designated a fallow year between the current scheme and the new scheme starting. Therefore, 2025 will not be covered by a target, but eligible participants will still continue to receive the discount for the certification period (until 31 March 2027).   The Base Year of the new scheme will be 2022, changing from the previous scheme’s 2018 base period.  The revised base year is seen as more recent and accurate representation of an organisation’s performance, as it is post-Covid/Brexit/Ukraine.

The new Target Period dates are:

• Target Period 1: 1 January 2026 to 31 December 2026
• Target Period 2: 1 January 2027 to 31 December 2028
• Target Period 3: 1 January 2029 to 31 December 2030

 

The Certification Period dates are:

• Certification Period 1: 1 July 2027 to 30 June 2029
• Certification Period 2: 1 July 2029 to 30 June 2031
• Certification Period 3: 1 July 2031 to 31 March 2033

New participants

For new entrants in existing eligible sectors, who wish to join before the start of the new scheme, there will be an initial application window from 1^st May to 31^st August 2025, and will be based on current eligibility criteria, as set out in the existing legislation. Future entrants will then be able to join during an annual application window of 1^st January to 31^st August, going forward. The updated scheme may also expand to include additional sectors, with new sector applications commencing in 2027 (pending eligibility verification).

However, existing participants will not be automatically transferred onto the new scheme and must undertake a reapplication process to confirm eligibility and desire to join the new scheme. A sample of organisations will also be audited by HMRC, to confirm eligible processes from historical applications remain.

The new scheme will also see additional changes, such as moving to facility-level reporting, so that each facility will have its own CCA – and meaning bubbling (the inclusion of multiple facilities as a target unit) will no longer be permitted and annual reports will be generated on how facilities are performing.

At IEC, we welcome this new extension to the scheme, which we view as a great incentive for businesses and industry to lower their energy usage and emissions. The extension allows continuity and momentum to build in the scheme and will hopefully mean more businesses will sign up.

Please get in touch with one of our energy experts if you are interested in becoming involved in the CCA scheme. IEC has over 20 years of experience in making CCA applications and managing the scheme on behalf of our clients, and we can help you check your eligibility and outline what the scheme can offer you.  

For more information, the full consultation document is available online

https://assets.publishing.service.gov.uk/media/670e33203b919067bb48315c/CCA-government-response-2024.pdf