However, there are many steps that a business can take to ensure that their green obligations don’t become a burden. This is particularly pertinent when considering the changes to environmental taxes that are set to take place in the coming months.
From 1st April 2019, the Climate Change Levy (CCL) will jump significantly, by 45% on electricity and 67% on natural gas, to compensate for the loss of tax revenue caused by the abolition of the CRC scheme. Electricity costs will rise from £0.00583/kWh to £0.00847/kWh, while natural gas will rise to £0.00339 from £0.00203 per kWh.
How will changing environmental taxes affect your business?
The abolition of the CRC scheme and the subsequent rise in the CCL will affect businesses differently according to their energy usage and the various schemes that they are participating in.
The changes are likely to be welcomed by large energy users that are currently required to participate in the CRC scheme, because even with the rise in CCL rates they should see a net saving once the CRC scheme is scrapped.
Any businesses that aren’t currently participating in the CRC scheme, however, will be affected by the substantial increase in the CCL. Organisations across the industrial, commercial, agricultural, public and service sectors are required to pay the CCL.
There are some exemptions to the CCL; businesses with very low energy consumption are exempt, as are charities that use energy for non-business purposes, businesses that use energy for mineralogical and metallurgical processes may also be fully exempt, whilst Industrial users in Climate Change Agreements get substantial reductions in CCL costs. Fuels can also be exempt from the main rates of CCL for a number of reasons, such as if they won’t be used in the UK or if they’re used in certain forms of transport or good quality combined heat and power plants. To find out more about exemptions, click here.
How can businesses mitigate the effects of the changes?
Whether you’re currently participating in the CRC scheme or not, it’s worth exploring how you can reduce your energy costs. The energy market remains volatile, with higher wholesale price compared with last year, so any energy savings you can make will be increasingly worthwhile.
The most straightforward way to ensure that your energy costs are as low as possible is to ensure that you’re using it as efficiently as possible. How you achieve this will depend on your budget – for smaller businesses, simply carrying out a site review and educating staff on how to save energy could make a real difference, while larger businesses may look to invest in a Building Energy Management system (BEMs) to control their energy consumption.
Renewable on-site generation is also becoming more commercially viable for many organisations – whether your budget stretches to installing a wind turbine or just a single solar panel, it’s worth investigating whether your business could benefit from renewable generation.
If your business is currently in a Climate Change Agreement (our current CCA clients are saving around £25 million per annum thanks to their agreements), the tax relief available from CCAs is set to increase in line with rising CCL costs, so eligible organisations that choose to enter into a CCA will receive a 93% discount on electricity and a 78% discount for other fuels from April 2019.
The CCAs impose a requirement on the participating businesses to achieve energy efficiency target over several years. If you fail to achieve these targets then the discounts can be reduced or lost completely, so this is a good time to see whether you are on track, and if not, take measures to improve.
Unfortunately, the CCA scheme is closing for new entries at the end of October, so it’s already too late to join if you haven’t already completed the application process.
Staying ahead of future changes
While the ending of the CRC and increase in the CCL won’t happen until April 2019, it’s wise to take action now to ensure that you’re working more energy efficiently or have your CCA in place by the time these changes come into effect.
Whether you’re looking for advice on energy reduction strategies, or you’d like expert guidance on applying for a CCA, Inenco’s team are on hand to help – give us a call today on 08451 46 36 26 or email email@example.com.