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Budget 2016: Climate change & the environment

17th March 2016

Melanie Harper

It was revealed in the Budget 2016 announcement yesterday (16 March) that, as part of the 'biggest business energy tax reforms since the taxes were introduced', businesses will see the back of the Carbon Reduction Commitment energy efficiency (CRC) scheme and subsequently an increase in the Climate Change Levys (CCL) from 2019.

The Budget document states 'The government is committed to meeting the UK’s ambitious environmental targets in a cost-effective way, ensuring value for money for the taxpayer and retaining protection for the smallest and most energy intensive businesses.'

In an effort to simplify the landscape and drive business energy efficiency, the Government have promised to;

  • Abolish the CRC energy efficiency scheme (CRC)
  • Increase the CCL from 2019
  • Re-balance CCL rates for different fuel types
  • Keep existing Climate Change Agreement (CCA) scheme eligibility criteria in place until at least 2023

CRC Energy Efficiency Scheme

The CRC energy efficiency scheme will be abolished following the 2018-19 compliance year. This will, according to the Budget 2016 document 'end a complex scheme with bureaucratic and costly administrative requirements'.

It is expected that this move will 'significantly streamline the business energy tax landscape' as we move towards adopting a system under which businesses will only be charged one energy tax.

Climate Change Levys

Climate Change Levys will be increased from 2019. The aim of this is to recover the revenue from the abolition of CRC and to 'incentivise energy efficiency among CCL paying businesses'

CCL Rates

CCL rates for different fuel types will be re-balanced to reflect recent data on the fuel mix used in electricity generation, moving to a ratio of 2.5:1 (electricity:gas) from April 2019. The long term plan is to further balance the rates, eventually reaching a ratio of 1:1 (electricity:gas) rates. The Government hope that this will 'strongly incentivise reductions in the use of gas, in support of the UK's climate change targets'.

CCA Scheme

Existing CCA scheme eligibility criteria will be kept in place until at least 2023. This will ensure energy intensive industries remain protected.

From April 2019, the CCL discount available to CCA participants will increase ensuring they pay no more than an RPI increase. In the Budget 2016 document, the Government have promised that they will 'ensure that these agreements deliver on their energy efficiency goals through a DECC-led target review this year'.

Carbon Price Support (CPS) rates

A statement in the Budget 2016 document promised a continued cap on CPS rates: 'At Budget 2014 the government capped Carbon Price Support (CPS) rates at £18 t/CO2 from 2016-17 to 2019-20 to limit competitive disadvantage to British businesses. Due to the continued low price of the EU Emissions Trading System (EU ETS), the government is maintaining the cap on CPS rates at £18 t/CO2, uprating this with inflation in 2020‑21, in order to continue protecting businesses. The government will set out the long-term direction for CPS rates and the Carbon Price Floor at Autumn Statement, taking into account the full range of factors affecting the energy market.'

For more information about any of the changes announce in the Budget 2016 or the sustainability services that Comply Direct provide, please do not hesitate to get in touch with one of our experts.

 

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