Synopsis
These regulations will extend the climate change agreement scheme until 31 March 2033.Changes made include three further target periods, revised buy-out calculation methods and the application of targets to each facility only, rather than allowing these to be applied across multiple facilities.
Holders of climate change agreements receive a discount against the climate change levy in return for binding energy or emissions reduction targets.
Summary
The Climate Change Agreements (Administration and Eligible Facilities) (Amendment) Regulations 2025 will amend the Climate Change Agreements (Administration) Regulations 2012 and Climate Change Agreements (Eligible Facilities) Regulations 2012 on 1 January 2026.
This legislation will apply across the UK.
What will change?
Holders of climate change agreements receive a discount on the climate change levy in return for binding energy or emissions reduction targets. These reduction targets are applied across a series of target periods and buy-outs are required for operators who do not meet the targets set.
Amendments to the Climate Change Agreements (Administration) Regulations 2012
Amendments add three further target periods for climate change agreement holders:
During these periods, the targets may only apply to each facility rather than ‘target units,’ which allowed the targets to be applied to multiple facilities. Targets have yet to be set for these new periods.
A buy-out formula is set for target periods 7 through 9, which determine fee payable for exceeding targets under the agreement. These fees reflect the rates of climate change levy applicable. This will increase the buy-out cost.
Updated requirements will apply to agreements on the submission of performance data during each target period.
Amendments to the Climate Change Agreements (Eligible Facilities) Regulations 2012
Climate change agreement holders will continue to receive the discounted rate of the levy until 31 March 2033.
Climate change agreement eligibility rules concerning primary energy use will be updated. A lower multiplication factor will be applied for electricity supplied to facilities from 2026. This factor is intended to reflect the greening of the grid and increased efficiency of generation, transmission and distribution.
Rules and the formula concerning electricity generated by Combined Heat and Power (CHP) plants will also be updated. This is intended to reflect the use of renewable and non-renewable fuels and verifying that exported electricity to the grid is only counted when the respective CHP Quality Assurance (CHPQA) standards are met.
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