Environment

Climate Change Agreement

Energy efficiency regimes

In addition to efforts to reduce CO2 from the tailpipes of vehicles, industry has also put effort into reducing emissions from the manufacturing process. There are several energy efficiency regimes that the industry is covered by, such as the mandatory EU Emissions Trading Scheme (EUETS), the voluntary UK Climate Change Agreements (CCAs), the UK Carbon Reduction Commitment (CRC) energy efficiency scheme and the Energy Savings Opportunity Scheme (ESOS).

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. Original CCAs ran until March 2013. From 1 April new CCAs have been introduced. Eligible participants of a SMMT CCA can claim a 90% discount on the CCL on electricity and 65% on gas in return for meeting a 15% reduction in energy use between 2008 and 2020. Almost 40 facilities have signed up to the sector’s CCA. Participants in the original CCA reduced their relative emissions (in kilowatts hours per vehicle terms) by 50% since the base year (1995), one of the best performances of any 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, including how to join, by reading the information below.

EU Emissions Trading Scheme (ETS)

EUETS is a mandatory cap and trade scheme and is the first international trading system for CO2 emissions in the world. The aim of EUETS is to help EU member states achieve compliance with their commitments under the Kyoto Protocol. It covers electricity generation, the main energy intensive industries and the manufacture of vehicles.  Those emissions combined account for around 40% of UK CO2 emissions. SMMT members EU ETS include the volume vehicle producers combustion activities, eg gas use in boilers and heating systems. SMMT members EU ETS covered emissions have been cut by more than 40% between 2005 and 2012, and by 20% since 2008 (measured in absolute emissions terms). Emissions went up by 2.5% in 2012, reflecting the increased production by the sector. In 2013 phase III of the EU ETS began, with a tightening of the cap of allowances and a move away from the free allocation of allowances towards auctioning.

Carbon Reduction Commitment (CRC)

CRC was introduced in April 2010 and is a UK mandatory cap and trade scheme aimed at those organisations not covered by CCAs or the EUETS. Organisations with half hourly metered electricity consumption greater than 6,000 mega-watts hours per annum (approx £500,000 worth) will qualify, all energy streams are then reported upon. Both public and private sector companies will have to buy allowances to cover the amount of emissions they emit each year. Annual performances will be publicly reported each year.

In 2011 it was announced that all the revenues raised from the scheme will no longer be recycled back to participants, but kept by government, in order to manage the public deficit. The CRC is expected to bring in £1 billion of revenue per annum and aims to reduce carbon emissions in large non-energy intensive organisations by 1.2 million tonnes of carbon per year by 2020.

In the 2012 DECC announced simplifications to the CRC, however, within the measures was the move to remove the CCA exemption rule from phase 2 of the CRC. Therefore, from 1 April 2014 any on site emissions not captured by a CCA or EU ETS will fall into the CRC. This is likely to create a significant administrative burden for those in such a situation.

Energy Savings Opportunity Scheme (ESOS)

ESOS is a mandatory audit scheme for all non-SMEs, to be conducted by 5 December 2015. 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 must be 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.

Cumulative impacts of energy efficiency regimes on competitiveness

SMMT is concerned that the cumulative effects of the EU ETS, CRC and introduction of other environmental taxes, such as the carbon price floor. These will increase energy costs and could undermine the competitiveness of UK-based companies, particularly those like automotive that compete in the global market place and export the majority of its products.

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.

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)

Summary

Entering a CCA offers the opportunity to save 90% of Climate Change Levy (CCL) on electricity and 65% 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) from 1 April 2013 will be 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.

Application process

The application process for joining a CCA is:

  1. Identify eligible area and establish business case for entering CCA
  2. Submit CCA application – see below for details
  3. Once application agreed the Environment Agency provides an underlying agreement to participant to be signed
  4. Once agreement in place the eligible facility is placed on the Reduced Rate Certificate and the site can then notify their energy supplier (through PP10 and 11s) and begin receiving the CCL discount on energy used in the eligible area.
  5. Sign SMMT CCA participation agreement (available on request).
  6. Pay SMMT annual administration fee (2014 fee is £2,500+VAT for SMMT members, for non-members it is £2,500 plus 5% of the CCL savings from being in a CCA). This fee includes the Environment Agency CCA fee.

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

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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