Carbon and Energy Newsletter - March 2023

It’s been a busy start to 2023 with plenty of carbon and energy compliance deadlines on the horizon. The government have also recently split the Department of Business, Energy and Industrial Strategy (BEIS) to create a new dedicated Department for Energy Security and Net Zero (DESNZ). The aim of this new department is to deliver security of energy supply, encourage energy efficiency and seize opportunities for the UK to lead in net zero goals.

This month’s newsletter looks at the government schemes becoming available for businesses to support on energy bills, what’s happening in UK ETS and carbon pricing, along with updates on Climate Change Agreements and ESOS.

Energy Bills Discount Scheme & Energy and Trade Intensive Industries (“ETII”) scheme

The government have recently announced that there will be a new Energy Bills Discount Scheme (EBDS) for UK businesses, charities, and the public sector. The scheme will run for 12 months from 1st April 2023 to 31st March 2024 and follows the Energy Bill Relief Scheme (EBRS) which ran from 1st October 2022 until 31st March 2023. This allows businesses to continue receiving support with high gas and electricity unit prices. Those eligible for the support will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill. Customers do not need to apply for their discount, as suppliers will automatically apply reductions to the bills of all eligible non-domestic customers. 

Businesses which are classified as Energy and Trade Intensive Industries (“ETII”) may be eligible to receive a further discount reflecting the difference between a price threshold and the relevant wholesale price. The price threshold for the scheme will be £99/MWh for gas and £185/MWh for electricity. Further information on the ETII scheme will be released by the end of March 2023, including guidance for firms that believe their operations are not correctly classified by Standard Industry Classification (SIC) code.

UK Emission Trading Scheme

Reminder!

• Submit your Activity Level Reports to ETSWAP by 31st March 2023
• Surrender allowances by 30th April 2023 – If you do not surrender the required number of allowances equal to your reportable emissions by this date, you will receive a mandatory penalty of £100 per tonne of CO2 (multiplied by the inflation factor). Please note the 30th April is a Sunday so realistically you should aim to complete by Friday 28th April.

EfW

Discussions are currently taking place within EU ETS for energy recovery to be included by 2026 and Energy from Waste (EFW) plants by 2030. A statement by the EU highlights that “EU countries must measure, report, and verify emissions from municipal waste incineration installations from 2024” and to be included in EU ETS from 2030 at the latest. UK ETS could potentially follow suit.

Small Emitter Legislation Update

Hospitals or small emitters (HSEs) are now able to voluntarily opt-out and return to the main scheme for 2024 and 2025 reporting. Before opting out, it is worthwhile checking whether you submitted a full free allocation (NIMs) application in 2019 and if that application was determined to be valid by the UK ETS Authority. This would affect whether you may be eligible to receive free allocation if you enter the main scheme. Those interested will need to request that their HSE permit is converted to a GHGE permit on or before 31st March 2023. 

Carbon Price

A review of the trends and current costs associated with the UK ETS allowance show that prices are currently tracking at around £83/tonne, approximately £4 lower than the EU allowance. Trends are showing that allowances in the UK and EU have increased from where they were at the start of 2023 and continue to fluctuate. Further details on the UK ETS markets can be found here.

Climate Change Agreements (CCA)

The deadline for Target Period 5 reporting is just around the corner with the cut off for data corrections is 31st March 2023. All data is then submitted to the Environment Agency in April 2023 and buy-out fee invoices (MoA) are issued in May 2023 for where targets have not been met. The MoA will need to be paid by 1st July 2023 for recertification and to receive CCL discount until the end of March 2025.

There is currently still no news on the consultation response from the government about a new scheme. It is anticipated that a data collection exercise will take place later this year to aid target negotiations / potential eligibility changes.

Energy Savings Opportunity Scheme (ESOS)

ESOS phase 3 audits are now fully underway to support large companies meet their next compliance deadline, 5th December 2023. Businesses are required to comply with ESOS if they:

• Employed 250 people or more
• …or had
  • an annual turnover exceeding €50m (~£40m), and
  • a balance sheet total exceeding €43m (~£38m)

Full guidance on how to comply with ESOS can be found here.

A public consultation to inform changes set out for phase 4 of ESOS have led to BEIS introducing changes which refocus the ESOS scheme to cover both energy efficiency and net zero. The government have also highlighted their intention to work with BSI to produce a Publicly Available Specification (PAS) which sets out the requirements for the process of carrying out an energy and net zero assessment, as well as revising the current PAS 51215: 2014 to set out the additional net zero competency requirements for assessors.