Isra-Mart srl:Budget 2011: Increased Climate Change Levy discount to benefit greener firms

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The government is offering an increased Climate Change Levy (CCL) discount for businesses that commit to delivering energy efficiency and carbon emissions improvements, in a move which could help manufacturers partially offset the financial impact of the Treasury's planned carbon floor price.

Chancellor George Osborne announced in yesterday's Budget that from April 2013 he will increase the Climate Change Levy electricity discount for firms which sign up to Climate Change Agreements (CCA) from 65 per cent to 80 per cent. He also confirmed that he would extend the tax break scheme for firms that sign up to CCAs until 2023.

CCAs currently allow energy-intensive businesses to receive an 80 percent discount from the levy, in return for meeting agreed energy efficiency or carbon-saving targets, but the discount is being reduced to 65 per cent from April this year. Osborne's announcement will quickly revert the tax break back to its current level.

John Cridland, CBI director-general, said the increased discount will offer an olive branch to manufacturers facing increased energy bills as a result of the government's plans to impose a carbon floor price from 2013.

"Support for manufacturers through the CCAs will help them manage energy costs, which is particularly important given that the government is pushing ahead with a carbon price floor," he said.

Heather Haydock, principal consultant at AEA, which has been working with the government on simplifying the CCA scheme, welcomed the move predicting it would further strengthen the financial case for firms to commit to reducing carbon emissions.

"Recent work by the Committee on Climate Change has highlighted the challenges associated with reducing CO2 emissions from UK industry," she said. "Today's announcement means CCAs will continue to operate as a useful policy measure for driving CO2 emission reductions from UK industry, out to 2023. The next step will be how the agreements will be simplified, which we expect to see later this year."

A consultation on proposals to simplify the agreements is slated to be launched by the summer.

Haydock added that since their introduction in 2001, CCAs have helped UK businesses across 9,000 operational sites reduce CO2 emissions by an annual average figure of almost 17 million tonnes, relative to baseline emissions before the agreements.