Environment

Climate Change Agreement

Energy efficiency regimes

In addition to efforts to reduce CO2 from the tailpipes of vehicles, the automotive industry is also investing in measures to decarbonise the manufacturing process. There are several energy efficiency regimes that the industry is covered by, such as the mandatory UK Emissions Trading Scheme (UK ETS), the voluntary UK Climate Change Agreements (CCAs), the Energy Savings Opportunity Scheme (ESOS) and the obligations for companies under Simplified Energy & Carbon Reporting (SECR) rules.

SMMT METS Group

SMMT members can join our Manufacturers Energy and Trading Schemes (METS) group to find out more about energy efficiency regimes, understand ways to reduce energy use and how best to find support to help undertake abatement activities. For more information contact Matt Croucher mcroucher@smmt.co.uk.

At automotive manufacturing sites, energy is often the second largest ‘in-house’ manufacturing cost, after labour, so it is critical to the competitiveness of UK-based businesses. The sector has made excellent progress in reducing emissions and so costs, but fully decarbonising automotive manufacturing will take a step-change in technology – innovations which have yet to be developed to a fully commercial stage and are likely to be very expensive.

Low cost, low carbon energy is crucial to the competitiveness of UK automotive, and so we are adversely impacted by the UK facing the highest electricity costs in the EU (source BEIS), with or without taxes, 70% above the EU average including non-consumption charges.

Climate Change Agreements (CCAs)

Climate Change Agreements (CCAs) were introduced in 2001 to support energy-intensive sectors from the impacts of the Climate Change Levy (CCL), a tax on the business use of energy. The original CCAs ran until March 2013 and where then replaced with a new scheme, which in turn was extended to cover emissions to 2022 and provide levy relief till 2025. Eligible participants of SMMT current CCA can claim CCL relief on electricity (of 92%) and gas (83%, rising to 86% in 2022 and 88% in 2023) if they meet energy efficiency targets – these were a 15% between 2008 and 2020, and are now no change from 2018 emissions in 2021/2022 (given the adverse impacts of Covid on the sector).

Eligible processes in our sector include activities such as paint shops, boilers, press shops and plastic injection moulding.

Find out more about SMMT’s CCA, by reading the information below or by looking at the government’ webpage.

UK Emissions Trading Scheme (ETS)

The UK ETS is the replacement for the UK’s participation in the EU ETS, now we have left the EU. SMMT members were participants in the EU ETS since its inception in 2005. The UK and EU schemes are similar, being mandatory cap and trade schemes – whereby caps are set on the amount of emissions allowed and then participants can comply with the scheme through trading allowances. The scheme covers gas use in electricity generation, the main energy intensive industries and the manufacture of vehicles. SMMT members are covered through combustion activities, eg gas use in boilers and heating systems.

SMMT members EU ETS covered emissions have been cut by almost 40% between 2013 and 2020 (phase 3 of the scheme). In the UK ETS automotive will be removed from the carbon leakage list, meaning it will need to buy significantly more allowances, adding to the cost of compliance. The UK scheme also has a tighter cap than the EU ETS and there are considerable concerns around the cost and availability of allowances. SMMT, like many other sectors, has called for the UK and EU schemes to be linked to better ensure a level playing field on the price of carbon.

Energy Savings Opportunity Scheme (ESOS)

ESOS is a mandatory audit scheme for all non-SMEs. ESOS is the government’s response to Article 8 of the EU Energy Efficiency Directive (2012/27/EU), which requires all Member States to introduce a regime of regular energy audits for ‘large enterprises’ (non-SMEs) to promote the uptake of cost-effective energy efficiency measures. These mandatory audits had to be first undertaken by 5 December 2015 and then at least every four years thereafter. Click through for SMMT’s support page on the Energy Savings Opportunity Scheme.

Streamlined Energy and Carbon Reporting (SECR)

From 1 April 2019 large unquoted companies consuming more than 40,000 kWh of energy per annum have had to report their energy use within their annual Directors Report – see more details. The scheme in effect covers some of the reporting requirements for the now defunct Carbon Reduction Commitment (CRC) scheme.

Improving energy efficiency – developing an action plan

Step 1 – Give energy a higher profile

  • Appoint an energy champion (assign an appropriate person to drive energy management, with direct support from senior management).
  • Develop an energy plan (produce a short document setting out the overall goals and a plan of action – with top-level endorsement and communicated to all employees)..

Step 2 – Assess how much energy you use, where and when

  • Identify meters and invoices (note the location of all utility meters and ensure invoices are easily available).
  • Monitor energy use, graph it and set targets (read meters regularly, plot consumption, check usage against targets, identify waste and take corrective action).

Step 3 – Take action and make savings

  • Conduct regular energy walkabouts (walk around specifically to identify and record energy waste, maintenance issues and opportunities for energy-saving measures).
  • Implement energy saving measures (devolve the energy plan to each area and assign responsibility: set priorities for action, with timescales, costs and savings).
  • Undertake stakeholder engagement (raise staff awareness regularly, gain support/ideas, train key people and provide regular feedback on progress toward targets. Communicate objectives and successes widely: other sites, suppliers and the community).

For further details on how to develop an action plan, get ideas on energy efficiency measures and see where further support to assist in energy efficiency can be found look at SMMT’s Dealer Energy Efficiency Guide many of the principles and ideas can be carried over to any business environment.

SMMT’s Climate Change Agreement (CCA)

The CCA window is now open for new entrants, until 31 March 2022.

Summary

Entering a CCA offers the opportunity to save 92% of Climate Change Levy (CCL) on electricity and 83% on gas. The CCL is a tax paid by all companies on the business use of energy. Only certain industrial processes are eligible for CCAs, generally those in the scope of Environmental Permitting Regulations, eg boiler houses and paintshops, as well as some energy intensive processes, such as plastic injection moulding. Eligibility for the CCL discount is conferred by a contract that includes energy efficiency targets. There are costs involved with CCAs – and it is not usually worthwhile for operators to join if CCL discount is less than £10,000/yr.

Eligibility 

Within the automotive sector eligibility is defined as:

A facility belongs to the Motor Industry Sector if it is a facility within the motor industry that undertakes one or more of the following activities: the casting of ferrous and non-ferrous metals in a foundry; the surface treatment of substances, objects or products using organic solvents, in particular for dressing, printing, coating degreasing, waterproofing, sizing, painting, cleaning or impregnating; the surface treating of metals and plastic materials using electrolytic or chemical process, operates as a forge, producing from a cold or heated metal work piece by a blow or series of blows a product or component with enhanced physical and or metallurgical properties, resin transfer moulding, plastic injection moulding, on-site nitrogen generation and the burning of fuels in a Part A combustion plants or if it is a facility where pre-formed or manufactured metal components are heat-treated to facilitate their formability or to enhance their service performance; the relevant processes and activities are all processes and activities involved in the heat treatment of pre-formed or manufactured metal components to facilitate their efficient formability or to enhance their service performance. The motor industry shall mean motor vehicles, components and accessories and shall include chassis of motor vehicles, trailers, engines, vehicle bodywork, freight containers, tyres and transport servicing equipment, and engine components for marine craft.

This means eligible energy use is confined to EPR installations and Directly Associated Activities – these are well-defined and coverage typically extends to:

  • Body pre-treatment and paint processes
  • Boilers and heating systems with aggregate capacity over 50 MW (also CHP)
  • Effluent treatment plant
  • Press shop
  • Foundries for casting components
  • Lighting, heating, ventilation, compressed air, etc. to support the above.
  • Some heat treatment processes related to energy intensive activities

(Some of these processes have thresholds – these are ignored except for combustion capacity of 50 MW)

Plastic injection moulding is also included in our CCA, as an Energy Intensive activity.

Please note certain metallurgical processes (eg castings, press shops) are eligible for a 100% discount on the CCL. Please contact SMMT for more details.

Eligible areas should be fully submetered, to ensure accurate data reporting.

In general, CCAs exclude:

  • Assembly
  • Machining
  • Final checks & QA
  • Testing
  • R&D
  • Canteens and restrooms

If more than 70% of the facility’s emissions are eligible for a CCA then the entire facility can be covered by the CCA, and get the CCL discount. If less than 70% of the facility’s energy is covered by the CCA then an additional 3/7ths can be added to the CCA area. This additional area needs to be fully submetered.

For more details on the CCA see the gov.uk website.

Go back to top

Contact

For any questions about the energy efficiency regimes outlined above, or about SMMT’s CCA in particular, please contact:

Matt Croucher | mcroucher@smmt.co.uk | 0207 344 1640