Carbon and Energy Newsletter (UK) - November 2024

Welcome to the November 2024 edition of your Carbon and Energy Newsletter. We’re delighted to bring a range of updates relating to climate change policy and reporting schemes. The long-awaited announcement of an updated Climate Change Agreement (CCA) scheme has now been confirmed. The UK Emissions Trading Scheme (UK ETS) recently finalised. Plus, there is additional information to be aware of for those participating in CDP, the Energy Savings Opportunity Scheme (ESOS), and the Industrial Energy Transformation Fund (IETF).

CCA

Updates to the CCA scheme following target period six (TP6) have now been confirmed![2]

CCA extension

The CCA scheme will be extended for at least another six years with new confirmed target and certification periods. Target periods will extend through to December 2030 and certification periods through to March 2033.

In order to participate in the CCA scheme extension, all existing facilities will be required to confirm that they meet the existing eligibility criteria. Existing facilities will not automatically be transferred and following an eligibility assessment will need to re-baseline with 2022 data.

Only existing sectors will be included in the extension, however new entrants can apply for the scheme from 1 May to 31 August 2025. New entrants into the scheme will then be able to apply every year between 1 January to 31 August.

SLR will be contacting businesses directly and releasing more in-depth articles which cover the changes in more detail, along with how it will impact companies. Not forgetting that 2024 data collection is also on the horizon for TP6 as request forms will be required in Q1 2025.

HMRC state aid reporting

The criteria and format for participants in a CCA to report state aid to HMRC has undergone updates which will impact some companies. The threshold for reporting subsidy information has been significantly reduced from £424,450 to £100,000, therefore more companies will be captured. Assessments should be carried out to determine the 2023 calendar year Climate Change Levy (CCL) allowance that has been received and, if this exceeds the reporting threshold, report to HMRC by 31st January 2025. The platform for doing this has also undergone changes as this now has to be submitted online. For calendar year 2024, the online form will be open to report this information from July 2025.[3]

UK ETS

A consultation with UK ETS operators has recently closed for a proposal to extend the first free allocation period. The proposal considers moving the start of the second allocation period from 2026 to 2027 and extending the current allocation period to include 2026. This is to align with the UK Carbon Border Adjustment Mechanism (CBAM) in 2027 and ensure a consistent approach for carbon leakage mitigation.

However, to ensure that sites looking to opt out aren’t negatively impacted by the extension, it is proposed that installations that wish to apply for hospital and small emitter (HSE) and ultra-small emitter (USE) status will potentially be classified as such from 2026. It is also proposed that changes to the current rules regarding the electricity generator classification will also come into effect in 2026 so as not to penalise sites whose classification is likely to change.

Carbon price

A review of the current trends and costs associated with the UK ETS allowance show that prices are tracking at around £39/tonne. This demonstrates a recent stabilisation of the price, tracking between £35 to £45/tonne in 2024. The EU allowance continues to be a different story, fluctuating at a higher rate around €65/tonne.[4]

Science Based Target initiative (SBTi)

The SBTi has released a sector-specific buildings target setting criteria. It aims to provide a framework for 1.5°C aligned emission reduction targets in the buildings industry towards achieving Net Zero goals.[5]

CDP

The scoring deadline for the 2024 disclosure cycle closed in October. The final deadline took place on 9th October 2024 and many organisations are likely to be relived that their submissions are now complete!

The next step will be receiving the score that organisations achieved for their disclosures. We understand that these are expected to be released before the end of the year, however we anticipate that delays may have knock on effects. Good luck to all organisations eagerly awaiting their scores and we will be in contact with supported companies once they are released.

ESOS

Following the ESOS compliance deadline in 2024, additional action is now required under the legislation for companies to produce and annually review an Action Plan. Due to the delayed functionality of the Manage your Energy Savings Opportunity Scheme (MESOS) portal, The Environment Agency (EA) are accepting completed action plans by 5th March 2025. Despite this extension, we would strongly recommend you keep carrying out all the preparatory work in order to submit them as soon as the portal is ready (1st November).

Although on the face of it, the action plan can appear to be a tick boxing exercise for completing your ESOS compliance requirements, it can be so much more. SLR has a team of experts who can tailor your action plans and progress reports to ensure that they are relevant and can help you realise opportunities for energy and cost savings across your business. Our team can support in drafting the plans or review what you already have.

For more information on the ESOS action plans and next steps, see our article and contact our team for support.

IETF

The next window for the IETF, originally planned for October 2024, has been postponed by the current government. This is now expected to take place in Q1 of 2025.[6]

IETF is a grant support package for energy efficiency and deep decarbonisation technologies at industrial sites. It supports projects that would be unable to go ahead without the grant and has a range of eligibility criteria to follow for a successful bid. Funding is allocated across three competition strands, for which businesses can bid in any one or more strands:

• Studies – feasibility and engineering studies.
• Energy Efficiency – deployment of technologies to reduce energy consumption.
• Deep Decarbonisation – deployment of technologies to achieve industrial emissions savings.

The competition is open to the following sectors, organisations, and professionals including:

1. Manufacturing
2. Data centres
3. Mining and quarrying companies
4. Recovery and recycling of materials companies
5. Controlled environment horticulture
6. Industrial laundries

Webinars

Our ESG Advisory team has a range of recent and upcoming webinars which may be of interest:

1. A technical approach to the decarbonisation challenge
2. UK Emissions Trading Scheme (UK ETS)
3. A holistic approach to climate and nature-related reporting

Our ESG Advisory team also recently ran a two-part webinar series which you might find useful:

Part 1: Latest EU reporting requirements with a focus on the requirements to do an EU Taxonomy disclosure if covered by CSRD.

Part 2: How to respond to the EU Taxonomy DNSH Climate Change Risk Assessment and Adaptation Planning requirements.

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References & notes

1. https://www.gov.uk/government/news/government-reignites-industrial-heartlands-10-days-out-from-the-international-investment-summit
2. The UK government’s final consultation report on the CCA scheme: https://www.gov.uk/government/consultations/climate-change-agreements-consultation-on-a-new-scheme
3. Additional guidance and access to the online form: https://www.gov.uk/guidance/climate-change-agreements-information-to-report-to-hmrc
4. Further details on the UK Emissions Trading Scheme markets: https://www.gov.uk/government/publications/uk-emissions-trading-scheme-markets/uk-emissions-trading-scheme-markets
5. https://sciencebasedtargets.org/news/the-sbti-unveils-framework-to-accelerate-buildings-sectors-alignment-with-net-zero-targets
6. More details on the spring competition page: https://www.gov.uk/government/publications/industrial-energy-transformation-fund-ietf-phase-3-spring-2024