Response to consultation confirms tax breaks designed to drive energy-saving investments will continue, as government flags plans for longer-term reforms to popular scheme will be revealed 'shortly'
The popular Climate Change Agreement (CCA) scheme, which offers tax breaks to companies that take steps to curb energy use, is to be extended until 2025.
In a formal response to its recent consultation on the proposed extension released last last week, the Department for Business, Energy, and Industrial Strategy (BEIS) confirmed the government has rubber-stamped the proposed reforms and will extend the scheme by two years until March 2025.
The move was announced as part of Chancellor Rishi Sunak's first Budget this Spring, which was immediately overshadowed by the escalating coronavirus crisis.
The consultation suggested that extending the CCA scheme through to 2025 would deliver around £300m of cost savings for qualifying firms, while helping to build on the 700,000 tonnes of CO2 emissions saved each year through the programme.
The CCA scheme sets targets for businesses to reduce their energy use in return for a discounts on the Climate Change Levy (CCL) on their energy bills.
As such, it is designed to provide a further financial incentive for companies to invest in approved energy-saving equipment that can help to curb energy use and carbon emissions.
The scheme had been scheduled to close in March 2023, but the consultation proposals - now adopted almost in full - set out plans to place new targets for qualifying companies from January 2021 allowing the scheme to be extended until March 2025.
Speaking at the time Energy Minister Kwasi Kwarteng said the extension would "give businesses greater clarity and security at a time when they need it most".
"This extension will save businesses money while cutting emissions - a key element of our work to combat climate change in the months and years ahead," he added.
The consultation response also confirms that new businesses will be able to apply to join the thousands of large energy users that already have CCAs in place. Under the previous rules, businesses have not been able to join the scheme since October 2018.
"New entrants will be allowed to apply to join existing sector agreements, with the Environment Agency expected to certify eligible new entrant facilities from January 2021," the new documents confirm. "The deadline for applications is extended to 30 November 2020."
The response also confirms that current eligibility criteria for qualifying for the scheme will be retained for the extension period.
The proposals were broadly welcomed by industry, with the government revealing that "there was strong support from businesses and industry for continuation of the scheme".
"Almost 9,000 facilities across the UK currently benefit from participation in the scheme, and a recent evaluation of the scheme found that in most participating sectors participation was between 80-100 per cent of eligible businesses," it added.
The consultation response also reiterated the government will undertake a longer term review of how to reform or replace the scheme beyond 2025, revealing Ministers "will look to confirm a timeline for further engagement on the future of the CCA scheme shortly".
The CCA scheme has faced criticism from some quarters in the past, with some technology providers and industries arguing it does not update the list of eligible technologies quickly enough, meaning firms can access tax breaks for deploying energy-saving systems that are no longer best in class.
The consultation response acknowledges this critique, noting that respondents "gave views on the eligibility criteria for a future scheme, the need to support both energy efficiency and carbon savings, and the potential for simplification of any future scheme and the wider policy landscape".
"Responses highlighted that a future reformed scheme could help industry in the transition to net zero, whilst supporting the competitiveness of businesses," it added.
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