The Department for Energy Security and Net Zero (DESNZ) has today (16 October) confirmed that it will extend the Climate Change Agreements (CCA) scheme by a further six years, following a consultation period.
The CCA scheme offers eligible businesses in carbon-intensive sectors, such as food and drink, plastics, and motor manufacturing, reduced rates of Climate Change Levy (CCL) on their energy bills if they agree to meet energy efficiency and decarbonisation targets, customised by sector. The scheme was established in 2001, and while participation is entirely voluntary, over 2,600 businesses across over 50 sectors currently take part in the scheme. The CCL savings for participating businesses are expected to be worth around £310 million per year, with the energy bill savings resulting from meeting CCA targets also providing significant cost savings for businesses.
The current CCA’s Target Period, during which businesses are assessed against their decarbonisation targets, formally ended in December 2023, with reduced rates of CCL available for those who had met their obligations until March 2025. However, in March of last year, the previous government announced a brief extension to the CCA, with a Target Period set to end in December 2024.
In its response to a consultation on the CCA, the government has now formally confirmed that the scheme will be extended for six years, with the next Target Period beginning on 1 January 2026. While a Target Period start date of January 2025 was considered, the government response to the consultation notes that industry respondents had expressed concern about establishing targets and getting prepared for the new scheme in time for this start date.
According to the government, the six-year period for targets has been specifically chosen in order to incentivise businesses to choose decarbonisation measures that have longer payback periods – as opposed to picking a less efficient in the long term “quick fix” – while also balancing the needs of taxpayers facing the annual cost of £310 million in reduced CCL payments.
Commenting on the announcement, Industry Minister Sarah Jones said: “The extension of the Climate Change Agreement scheme is a critical step in supporting our energy-intensive industries as we transition to a low-carbon economy.
“By providing £310 million a year in savings, we are enabling businesses to invest in energy efficiency and decarbonisation projects, which will strengthen their competitiveness while advancing the UK’s path to net zero.
“This is not only an investment in cleaner technologies but also in the long-term resilience and success of our industries.”