Find out how you can get the most out of your agreement and reduce carbon buyout costs with Envantage.
Climate Change Agreements (CCAs) allow a valuable discount on CCL charges to be realised, saving agreement holders thousands of pounds per year (link to CCL discount rates). CCL discount rates have just increased due to the removal of the CRC scheme. To ensure you get this higher level of discount, you need to make sure you submit new PP10 and PP11 forms before the end of the month.
Due to the rise in CCL charges and the increase in associated discount rates, holding a CCA is now more valuable than ever. As a result, it is imperative that your agreement is correctly managed to ensure compliance, and that you are taking steps to get the most out of your agreement as we enter the final target period for this phase.
Failing a target and buyout costs: How to make decisions on paying
In return for this valuable discount, CCA holders are required to meet energy and carbon reduction targets. We have now reached the end of the reporting stage for the third target period (2017 & 2018), with many agreement holders facing carbon buyout charges, which you may also have heard being called fines.
Many organisations unfortunate enough to be facing buyout charges may be unsure if it’s worth staying in the scheme. You may also be considering the likely higher buyout charges for the final target period and how to reduce costs.
If you have a carbon buyout, these charges must be paid by June 2019 in order to stay in the scheme and continue to benefit from the CCL discount. Some agreement holders may be considering the cost of the carbon verses the CCL savings they have achieved when deciding to pay this or not. For some this will be an easy decision, however, if you have a large carbon buyout cost, this may be a more difficult exercise.
Tracking your CCA performance and savings
To make a decision on paying carbon buyout charges, or reviewing how the agreement is performing, it is important to not just look at each target period in isolation. Many factors over the life of the scheme to March 2023 need to be considered such as:
• Higher CCL savings over the future of the scheme due to CCL rate and discount rises. • Expected carbon buyout costs in target period four. • Sector and Environment Agency fees. • CCL savings over the ‘non target’ period from January 2021 March 2023: Organisations that pass or purchase carbon to pass target period four can continue to get the CCL discount, but face no targets or buyout costs for the final period.
Making the right decision about your Climate Change Agreement
Envantage can conduct a full cost benefit analysis of all savings and expected costs over the lifetime of the scheme so you can make an informed decision on whether to pay your current carbon buyout. Making the wrong decision may cost you your agreement, and a large increase in energy costs. Why not benefit from knowing this information on a more regular basis and accrue for carbon costs? Envantage offer this cost benefit analysis as part of their regular CCA management performance tracking reporting.
If you are lucky enough to not have a carbon buyout for target period three, do you know if you have an expected carbon buyout for the final target period and if so, are you taking steps to minimise this whilst you can? Contact Envantage to find out more about how we can project your expected performance for the next target period and reduce costs.
How to alleviate failing CCA targets and carbon costs
We have now entered the fourth and final target period. Most CCA holders will fail targets in this period and therefore face carbon buyout costs. If you are unsure of your current performance against targets, then Envantage can help review and predict this as part of our performance tracking service.
As we are still in the early months of target period four, the good news is that steps such as energy audits can be taken to help reduce buyout charges if action is taken soon.
Energy auditing and energy efficiency
As well as a qualitative requirement of the scheme, having an action plan to tackle energy wastages via improved energy management, awareness and monitoring, and a range of energy savings projects to implement, can help reduce energy consumption, expected carbon fines and energy cost.
Envantage has a number of highly experienced energy efficiency consultants specialising in the industrial sector, who can help identify areas of energy inefficiency and recommend energy savings initiatives. Our energy auditing service identifies savings of up to 40%, from low or no cost measures up to those requiring capital expenditure. If you are affected by ESOS, then these link nicely together and we can help you meet ESOS compliance as well as alleviate CCA target costs.
Review of product mix and CCA target ‘currency’ or throughput metrics
Agreements usually track performance on a relative basis (e.g. kWh/tonne), using one simple metric such as production volume. Most agreements were set up a many years ago, and for some sites the type of products manufactured are not simple enough to have only one metric, in other cases process improvements have impacted energy intensity significantly over the course of the agreement. As a result, this can mean some sites can find it difficult to pass targets simply due to the way performance is tracked.
Luckily, there is a mechanism available in the agreements to consider multiple products and how performance is tracked to account for such changes. This can allow some sites to reduce carbon buyout costs or even convert performance into a pass. Envantage’s experienced consultants can assess if there is scope at your site under the strict rules, and work with you to amend targets and reduce carbon costs.
If you would like further information on performance tracking, compliance, and reducing your carbon costs please contact Jessica at Envantage on 0161 448 7722 or Jessica.firstname.lastname@example.org – or fill in the Contact form on our website.