Climate Change Agreements

Page type: primary-anchored (mirrors CCA Statutory Guidance 2026 + SI 2025/813)

Source file: ccas.md

Last updated: 2026-04-05

What this instrument does

Climate Change Agreements are voluntary agreements between UK industry and the Environment Agency. Energy-intensive industrial facilities commit to meeting energy efficiency or carbon reduction targets. In return, they receive substantial discounts on the Climate Change Levy (CCL) -- up to 92% off electricity and 89% off gas. The scheme has been running since April 2013 and entered its third phase (CCA3) on 1 January 2026, running to 2030 with administration continuing to March 2033.

The scheme sits within the CCL framework established by the Finance Act 2000 (Schedule 6). The operational rules are set by the Administration Regulations 2012 (SI 2012/1976, as amended). Who qualifies is determined by the Eligible Facilities Regulations 2012. The statutory guidance tells the Environment Agency how to apply these rules.

How it works

The deal

An operator of an energy-intensive facility joins a CCA through its sector association. The sector association holds an "umbrella agreement" with the Environment Agency, which contains sector-wide energy efficiency targets negotiated with DESNZ. The operator then enters an "underlying agreement" for its specific facility, deriving individual targets from the sector commitment.

If the facility meets its target during a target period, the Environment Agency certifies it as eligible for reduced CCL rates during the corresponding certification period. If it misses the target, the operator can either pay a buy-out fee (currently GBP 37/tCO2e for TP7) or lose its CCL discount.

Who is eligible (Para 11-12)

A facility qualifies if: - The operator can prove identity and legal entitlement - The facility meets paragraph 50 of Schedule 6 to the Finance Act 2000 (eligible facility criteria) - Its activities fall within the scope of an umbrella agreement - At least 70% of the reckonable energy supplied to the facility is used in eligible installations (the "70% rule", Para 12)

The 70% rule is the key eligibility gate. "Reckonable energy" is defined in Regulation 3(1)(a) of the Eligible Facilities Regulations 2012. All energy used in eligible activities counts, including energy also covered by the UK ETS. However, UK ETS-covered energy is excluded from CCA targets (though still reported for decarbonisation tracking).

Sub-metering (Para 13)

Where the 70% threshold is uncertain: - Estimated at 70% or above: main site meters are sufficient - Estimated below 70%: permanent sub-metering is required - Additional activities using up to 3/7ths of reckonable energy must be sub-metered

Target periods (CCA3, from Para 7)

Administration continues to 31 March 2033 (to allow final certification and buy-out settlement).

The base year for CCA3 is 2022 (Para 20). Operators must provide a minimum of 12 months of continuous, representative data for their 2022 base year.

CCL discount rates

These are substantial: a 92% discount on the electricity CCL rate is the core financial incentive for participation.

Buy-out mechanism

Facilities that miss their targets pay a buy-out fee per tonne of CO2 equivalent of under-performance. The fee has risen steadily:

The TP7 fee is a 48% increase from TP6. At TP6, only 45.5% of target units met their targets and the scheme collected GBP 40.2 million in buy-out fees. The rising fee is intended to shift the cost-benefit calculation towards investment in efficiency rather than buying out.

Late buy-out payments are accepted but certification runs from the payment date, not retroactively (Para 34).

New entrants (Paras 27-33)

New entrants (facilities not participating at the start of CCA3) can apply during an annual window of 1 January to 31 August, in years 2026-2029. No facility can be added after 1 January 2030.

Target setting for new entrants: - 2022 base year: full sector commitment applies regardless of join date (Para 32) - Non-2022 base year (e.g. brownfield with later data): targets calculated by linear interpolation, assuming improvements from 2022 already achieved (Para 33) - Greenfield new entrants: use a reasonable estimate, substitute with actual data within 12 months of agreement activation (Para 22)

Key structural changes in CCA3

The Climate Change Agreements (Administration and Eligible Facilities) (Amendment) Regulations 2025 (SI 2025/813), in force 1 January 2026, made several important changes:

1. "Target unit" replaced by "facility" throughout -- reflecting the shift from bubbled multi-facility targets to facility-level accountability
2. Primary energy factor reduced from 2.6 to 2.1 for electricity -- reflecting lower grid carbon intensity
3. Self-generated solar, wind, and water power excluded from the primary energy factor multiplication -- an incentive for on-site renewables
4. New biomass definitions distinguishing renewable and non-renewable fuels
5. Buy-out fee formula updated with new carbon emission factors (0.0274 kgCO2/kWh for electricity; 0.0497 kgCO2/kWh for gas)
6. Base year variation deadline of 1 May 2026 for existing agreements

Scheme scale

At the end of TP6 (2024), the CCA scheme covered: - 3,332 active underlying agreements across 8,685 facilities - 50 active sectors under umbrella agreements - Total reported emissions of 19.9 million tCO2e - Adjusted emissions reduction of 5.94 million tCO2e (23.0%) against the adjusted baseline - 6,656 facilities certified for CCL relief

Legal architecture

Finance Act 2000, Schedule 6
  --> Climate Change Levy (the tax)
  --> Paras 50, 52A(1), 52D(6) (CCA enabling powers)
      --> Administration Regulations 2012 (SI 2012/1976, as amended)
          --> How the scheme operates
      --> Eligible Facilities Regulations 2012 (SI 2012/2999, as amended)
          --> Who qualifies
      --> Statutory Guidance 2026
          --> How the Environment Agency applies the rules
      --> Umbrella agreements (sector-level)
          --> Underlying agreements (facility-level)

Cross-references

Defined terms

See the canonical source file for the full defined terms register.

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