Government intends to reset the baseline and impose higher buyout costs for an extended Climate Change Agreement (CCA) scheme that reopens to new entrants this month.
It also plans to stop participants ‘banking’ historic carbon savings in order to qualify for fresh incentives.
CCAs provide carbon tax breaks worth £300m a year to firms that cut energy use and carbon emissions.
In the last Budget, government said it would extend the scheme for two years to 2025 and reopen it to businesses, having closed to new entrants in 2018.
Beis now seeks view on how that should work and on potential reforms should it decide to carry the scheme beyond 2025.
The consultation indicates eligible firms wishing to join the CCA programme will have until 30 September to do so, with applications to open later this month.
It proposes resetting the current target baseline from 2008 to 2018, tasking businesses with cutting energy consumption 20 per cent by 2030, in line with the 2017 clean growth plan.
Companies’ actual performance against those targets will then be published every two years from 2023.
The CCA scheme operates in two-year target periods. Beis indicated it will not allow over performance in early periods to be carried over into the new periods. That means companies will have to continue making improvements to gain their tax discount.
Equally, companies will not be able to use early over performance to avoid the buyout aspect of the scheme – which obliges participants to pay £14/tCO2e for failing to meet their targets.
Beis said about half of participants have been using banked over performance and/or buyouts to meet their targets. To discourage that, it plans to hike the buyout rate to £18/tCO2e.
More detail here.