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Through the Making Policy Clear Series, Acclaro Advisory informs clients of policy and regulatory changes around energy, environmental and social issues. Series 1 is focused on the energy and carbon regulatory schemes which impact business energy cost and reporting responsibilities.

Increased Climate Change Levy – Why is CCL increasing?

At end of July 2019, the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme is set to be closed.

The CRC is one of the two energy taxes that target large energy-intensive organisations. This tax is levied to encourage energy efficiency in business. The end of CRC will result in a significant increase to the Climate Change Levy (CCL) to recover the loss of the CRC energy taxation revenue.

Who pays CCL?

The second energy tax is to encourage energy efficiency in business is the CCL.
Exempt from CCL are organisations using less than 1,000kWh electricity and less than 4,397kWh gas, per month.

The end to CRC will simplify the various levels of compliance and reporting regimes for many organisations. While energy and carbon reporting will remain, the additional administrative burden of CRC will be significantly reduced, as it is likely that the organisations affected will also be compliant to mandatory greenhouse gas reporting.

How will the increase to CCL Affect Me?

  1.  For organisations where energy consumption is not a major component of business expenditure, the increase in CCL rates may not create a major impact on overall business costs. However, energy cost will increase from 1st April 2019.
  2.  If you are covered under the Climate Change Agreement (CCA) scheme, the CCL rate increase will have little to no impact on business energy cost, with the increase more significant to natural gas and LPG costs in comparison to the previous years’ costs.
  3.  If you are currently part of the CRC scheme, the energy tax is ultimately transferred to the increased CCL rates. From April 2019 energy bills will increase. Organisations will be required to submit their last CRC report by the 31 July 2019 and surrender allowances for the last time by the end of October 2019. The new Streamlined Energy and Carbon Reporting (SECR)1 framework will require organisations to continue to calculate and report the total annual energy consumption and carbon emissions.
  4.  Typically, this change will add between 2 – 4% to the business energy bill.

More on the impacts of SECR can be read in part one of this series here.

How can I prepare for this change?

CCL is added to energy bills by energy suppliers, therefore there are no changes necessary for consumers to accommodate the increased taxes. However, these organisations should consider ways to reducing business energy cost to minimise the impact of the increased tax.  Energy efficiency is widely recognised as the most effective way to reduce energy consumption and costs. The CRC scheme was designed with an aim to incentivise improving energy efficiency and reducing carbon emissions in large energy intensive organisations.  Well run energy audits can uncover several opportunities for energy efficiency. However, if not combined with effective implementation, the true value of these opportunities can be lost.

How Acclaro Can Help?

The Acclaro Energy Programme is an end-to-end energy management package that helps your business to get to grips with its energy consumption from all angles. Our programme helps you adapt and address responsibilities of energy efficiency as a business, whether cultural, technical or financial.  At Acclaro, we possess vast experience in CRC, CCA, energy efficiency and reporting with a variety of clients. Our Energy Team assists clients through expert advice and detailed energy audits, providing opportunity for further energy reduction when in-house teams can no longer identify. Our energy programme is designed to support you through a series of phases forming parts of your energy efficiency journey; from understanding energy consumption to embedding energy efficient practices into day-to-day business.

As organisations portfolios, data collection, emissions methodologies and reporting procedures vary significantly, it is important to plan before the change occurs. We are setting up discussions with a range of clients to further understand how the closure of CRC will impact their organisation. If you are keen to learn more, please contact us.

Our team can create a detailed action plan utilising your current processes to help streamline and reduce the impact of this transition. For a breakdown on the full extent of the impact to your organisation, steps to comply and where Acclaro’s expertise can support, email us now at info@acclaro-advisory.com to arrange a consultation.

Through the ‘Making Policy Clear’ Series, Acclaro Advisory will inform clients of policy and regulatory changes around energy, environmental and social issues; bringing clarity to governance, compliance and targets so you can get on with regular business activities. We dismantle the complexities of new and amended legislation and standards in a way that will help you meet your requirements today and be ready for new ones tomorrow.

This first series is focused on the energy and carbon regulatory schemes which impact business energy cost and reporting responsibilities. Our team has pulled together key information and insight on what is expected to occur and how organisations can prepare. Part one of this series will focus on the Streamline Energy and Carbon Reporting (SECR).

We would be happy to provide a detailed breakdown on the full extent of the impact to your organisation, steps to comply and where Acclaro’s expertise can support. Email us now at info@acclaro-advisory.com to arrange a consultation.

Streamline Energy and Carbon Reporting (SECR)

What is SECR?

The Streamlined Energy and Carbon Reporting (SECR) framework will be in effect from April 2019 as part of a new policy landscape. The framework has been designed to streamline and reduce complexity in the carbon and energy reporting regimes while broadening the scope for reporting compliance. This is set to impact approximately 11,900 companies (PCL) and 230 Limited Liability Partnerships, up from the approximately 1,200 required to report carbon emissions.

SECR will require large companies to report their annual energy consumption and carbon emissions in Annual Director Reports alongside financial data.  The new framework comes ahead of the closure of the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme, set for the end of July 2019. The Climate Change Levy (CCL) and CRC are two energy consumption taxes on large energy-intensive organisations currently levied to encourage the businesses to consume energy more efficiently. The end of CRC includes an increase on the Climate Change Levy (CCL) rates as a re-balance measure to recover the loss of the CRC energy taxation revenue.

At Acclaro, we feel that the new requirements can have a significant impact on many organisations and can ultimately increase their administrative burden. This can be said mainly for the many organisations which did not participate in similar schemes but are now captured in the new compliance scope. Moreover, the accompanying changes to the energy tax regime will have a significant impact on energy costs. On the other hand, increased energy cost and increased transparency for investors and other stakeholders will encourage more companies to be accountable and responsive to the need for effective energy management and carbon reduction to meet UK climate change targets.

Who needs to Comply?

The compliance structure of SECR is very similar to the compliance criteria of ESOS. The need to comply with the new framework will be based primarily on financial or employee thresholds.

An organisation falling near to these thresholds will need to clearly explain why they do or don’t need to comply with the regulations. They will also need to maintain an evidence pack which could be subject to audit by the Environment Agency. Additional specific exemption conditions apply under limitations of data and prejudicial disclosure concerns; only expected in exceptional circumstances.

How will SECR Affect Me?

There are a series of minimum reporting requirements that must be met. For example:

1. If you are already reporting under mandatory Greenhouse Gas (GHG) reporting there is little change except for the inclusion of annual energy use and energy efficiency action in your company annual reports.
2. If you are reporting and purchasing credits in the Carbon Reduction Commitment (CRC EES). The new SECR regulation will replace the CRC reporting framework with much of the direct costs of CRC shifted to the increase on Climate Change Levy¹.
3. If you comply with ESOS. It’s likely that most organisations who have had to comply with the Energy Saving Opportunities Scheme (ESOS) will be required to report additional information under the new scheme. This will introduce annual public disclosure of energy use, energy efficiency action and scope 1 & 2 carbon emissions.
4. If you don’t fall into either of the current reporting schemes. It is likely that some organisations, such as public authorities and charities, normally exempt from mandatory energy and carbon reporting requirements, will fall into the broadened scope of this new framework. It is critical for such organisations to act now in preparation for the 2019 reporting requirements.

¹More on the impacts of increased CCL rates can be found in part two of our Making Policy Clear – Energy and Carbon Series here.

How Do I Comply?

Compliance varies by organisation and its current reporting regime. Reporting will be based on the company’s annual reporting cycle and is required through the company Annual Reports. Typically, Director Annual Reports must include:

1. Annual UK energy use covering all UK sites, including business travel.

2. Annual scope 1 and 2 greenhouse gas emissions, including an intensity metric and methodology. Scope 3 emissions can be reported voluntarily.

3. An overview of annual energy efficiency action taken in the financial year. Companies can voluntarily disclose ESOS action as a part of this report.

4. Where practical, annual global energy use and greenhouse gas emissions (if applicable).

How Acclaro Can Help?

We expect to see more details on the framework and updated to legislation in the coming months, with an impact to reporting in 2019. As organisations portfolios, data collection, emissions methodologies and reporting procedures vary significantly, it is important to plan before the roll out of the framework occurs.

The Acclaro team has a breadth of experience in ESOS, GHG and sustainability assessments with a variety of clients from IT technology companies to Opera theatres and public bodies. Our clear structured approach supports compliance regimes and we help to validate and back up your results, so you have a solid sounding board for your sustainability reporting. Our team has assisted many companies to adapt for and address responsibilities that sit within energy efficiency. Our clients have benefited from investor interest, improved recruitment and client retention. We can help you turn compliance risk into opportunity.

We are setting up discussions with a range of clients to further understand how SECR will impact their organisation.

If you are keen to learn more, please contact us. Our team can create a detailed action plan utilising your current reporting regime to help streamline your transition into this new framework.