The CCA scheme is a voluntary scheme for firms in certain energy and trade-intensive industry sectors, which offers discounts on the Climate Change Levy (CCL) in exchange for firms meeting targets for carbon or energy efficiency improvements (or making ‘buy-out’ payments if targets are missed). Forming part of the Government’s Clean Growth Strategy, the scheme aims to support the retention of energy-intensive industries in the UK while improving the energy efficiency of these industries. The second CCA scheme started in 2013 and an extension of the scheme was announced in a recent Government budget.

CAG Consultants led the evaluation of the second Climate Change Agreements scheme on behalf of BEIS, in partnership with Winning Moves, University College London and Cambridge Econometrics, with Verco and Strategy Development Solutions. This was a complex, theory-based evaluation involving micro-econometric analysis and macro-economic modelling, as well as qualitative and quantitative research and analysis of CCA scheme data.

The evaluation found that the CCA is a well-established scheme that is popular with industry, with effective systems in place for delivery. While slightly more than half of target units in the scheme met their targets in the first three target periods of the second CCA scheme (between 2013 and 2018), the level of underperformance was low. Almost all CCA participants had taken action on energy efficiency since the start of the scheme. Although there are many influences on energy efficiency, micro-econometric evidence found that electricity consumption on CCA sites was at least 4% lower than on similar sites subject to the CCL, implying that the scheme was achieving its energy efficiency objectives. Evaluation research suggested that the CCA tended to have more influence on firms that had not previously taken a systematic approach to energy efficiency, those that faced challenging targets, those with a culture of complying with targets, those with strong board-level engagement with energy, those with keen energy managers and those that ring-fenced CCL savings to fund energy measures. The evaluation evidence indicated that the scheme had more additionality where targets were more consistent, challenging and were supported by evidence agreed with the relevant sector association. It also suggested that buy-out fees helped to motivate energy efficiency action for some participants. There was some evidence that targets were becoming harder to meet over time as targets tightened and as easier/lower cost measures were completed.

Macro-economic modelling found that the scheme made a contribution to the competitiveness of energy industry in the UK, defined in terms of increased Gross Value Added. The scheme was found to have more influence on the competitiveness of firms facing greater international competition, including those owned by international companies, and on those in highly energy-intensive sectors that were not already exempt from CCL under the mineralogical-metallurgical exemption (e.g. chemicals, plastics). Overall, the benefits to society outweighed the costs of the scheme, although restricting the scheme to more energy- and trade-intensive sectors could possibly improve cost-effectiveness further. The evidence suggested that the contribution of any future similar policy to supporting clean growth will be strongly influenced by the tightness of the scheme’s targets.

For further information on the evaluation, you can download the report here

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Feb 21, 2023