The Climate Change Levy (CCL) is an environmental tax on energy. The intention behind the tax is to encourage business consumers to lower their consumption, encouraging them also to think about their environmental impact and how they can reduce their carbon emissions. It applies to businesses in the industrial, public services, commercial and agricultural sectors, covering energy used for heating, lighting and power. In short, unless your business is a charity or you are small enough to be classed as a domestic user, the CCL already raises the cost of your energy bills.
Price rises due in April 2019
In the March 2016 Budget, the Government announced it would withdraw the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) at the end of the 2018/19 compliance year. As a result, Climate Change Levy (CCL) will be the UK’s only carbon tax on energy bills. The Government is therefore increasing the CCL rate and from April 1st, businesses will see big rises in the CCL: up to 45% for electricity and 67% for gas. This translates as a rise from £0.00583 to £0.00847 per kilowatt hour (kWh) for electricity and a rise from £0.00203 to £0.00339 per kilowatt hour (kWh) for gas.
With commodity and non-commodity energy costs already on the rise and uncertainty over Brexit likely to have ongoing effects on the value of the pound, CCL increases will mean an additional strain on the stretched budgets of UK businesses. It will be crucial for those businesses to revisit their energy strategy – and look for news way in which to protect their bottom line in both the short and longer term.
Mitigating rising costs
CCL charges are directly linked to how much energy you use, so the first way any business can reduce the amount they pay is to reduce the amount they use. Energy savings opportunities identified by ESOS audits will be a valuable tool for many businesses here: implementation will not only reduce how many units you use and pay for, it will also reduce the tax on that consumption.
Many industrial users already participate in the Climate Change Agreement (CCA) scheme. If your business is eligible, an agreement is incredibly important because it exempts your organisation from 90% of the CCL on electricity and 65% on other fuels – set to increase to 93% and 78% respectively during 2019. Some manufacturers within the mineralogical and metallurgical sectors may already be eligible for up to 100% relief.
CCAs are voluntary agreements, available for a wide range of operations including energy intensive and agricultural industries. Businesses who apply for and sign up to a CCA must measure and report against agreed carbon reduction targets over four, two-year target periods. Meeting the targets enables them to avoid penalties – which will become even more important as the targets tighten. Here, once again, identification of energy reduction opportunities and implementation of efficiency measures comes to the forefront.
Unfortunately, the CCA scheme is currently closed to new entrants and its future is under review. Those already participating will be impacted by the rate changes and will be required to submit new CCL declarations to their energy suppliers using the new rates ahead of April 1st, as certificates cannot be backdated.
Ask for help
Negotiating your way through the CCA process can sometimes be tricky, as can maintaining reduction levels and complying with legislation. When relief levels change, you want to be sure you benefit straight away and avoid overpaying CCL charges.
Help from an expert partner provides a simple answer to this problem. When you choose to partner with Inenco for your CCA requirements, we can advise you on the best ways to maximise the relief for your organisation and assist you in tracking against targets and achieving optimal energy performance. We also have all the expertise you need to help you keep your energy budget in great shape.
We’ve already guided more than 200 organisations through the CCA process, with current clients benefitting from savings of around £25 million each year. We believe in making progress reporting as easy and accessible as possible and will be there with you for every key milestone.
If you think Inenco could help your business reduce it’s CCL costs, please get in touch today on 0800 408 1499 or request a call back here.