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BusinessClimate Change LevyRunning alongside the Renewables Obligation is a drive for increased energy efficiency and the Climate Change Levy (CCL). Introduced on the 1st April 2001, this is a tax on energy use by both business and public sectors. The principal aim of the levy is to encourage non-domestic electricity users to become more energy efficient and so reduce carbon emissions. The levy package as a whole is expected to save at least 5 million tonnes of carbon a year by 2010. Relevant electricity bills increased by an average of 8-10%. The Climate Change Levy Calculator at www.climatechangelevy.com will give a more accurate indication of what a business might expect to pay. The levy was forecast to raise around £1 billion in 2001/02, and to ensure that the competitiveness of UK business remains unaffected, all revenue raised will be recycled back into business. This will be achieved primarily through a 0.3% cut in employers’ National Insurance Contributions and £150m of additional government support for energy efficiency measures and energy-saving technologies. This is by no means bad news for business; rather business will benefit not only from the cut in employers’ NICs, and the 80 per cent levy discounts for energy intensive sectors that agree energy efficiency targets with the Government, but also from the exemptions for electricity generated from new forms of renewable energy and in good quality combined heat and power (CHP) plants. Mitigation measuresReducing the impact of the levy can be achieved in three main ways: use renewable energy or good quality CHP units and increase energy efficiency, thereby reducing energy use. Switching supply to an accredited ‘green’ generator is probably the simplest route to take. Renewable energy generators who meet Customs & Excise conditions for exemption will be issued with Levy Exemption Certificates (LECs) for their generation. The LECs transfer along with the electricity and can be used by business consumers to claim levy exemption. As the cheapest of the renewable energies, wind power is the most attractive of these alternative technologies. A more long-tem and financially rewarding approach would be to generate electricity using a renewable resource, and here wind power is again the obvious winner. There are few locations in the UK that do not have a sufficient wind resource to generate electricity; by erecting a single turbine onsite, a business could qualify for levy exemption while supplying a proportion of it’s power requirements for 25 years from one of the cheapest and most abundant fuels naturally occurring in the UK. Many businesses are taking the latter approach, such as supermarket chain Sainsbury's, where 25-40% of the energy required by its distribution depot at East Kilbride in Scotland is now generated from a 600 kW wind turbine. Meanwhile at its low-energy supermarket at Greenwich, designed to use up to 50% less energy than a conventional supermarket, two small photovoltaic-wind hybrid systems power the lights. The advantages are undeniable; the potential is huge. The UK has the largest wind resource in Europe, theoretically sufficient to power the country several times over. Harnessing the power of the wind presents a business opportunity that will guarantee a sustainable future. CCL is bringing emissions reductionsIn the 2006 Budget, the Chancellor announced that, from 2007, the Climate Change Levy will be indexed to the rate of inflation with the revenues returned to business. The Treasury also published an analysis by Cambridge Econometrics of the impact of the levy on emissions, which concluded that the levy has contributed to a reduction in business demand for energy and that this, in turn, has resulted in a fall in carbon emissions. The levy is described as "the most effective instrument to date for reducing emissions in the business sector". Cumulatively it has saved 16.5 million tonnes of carbon in the period to 2005 and will be contributing savings of more than 3.5 million tonnes of carbon by 2010. According to the Cambridge Econometrics' analysis, energy demand will have fallen by 2.9% by 2010 compared with what it would have been without the levy. A further contribution will come from Climate Change Agreements for the most energy intensive sectors. These are expected to save a further 2.8 million tonnes of carbon annually by 2010 and will cover around 10,500 installations. For more information on the Budget and CCL analysis report, visit the HM Treasury's website. AdviceFor further information on scope and administration of the levy please contact: CCL Help Desk, 3rd Floor West, Ralli Quays, 3 Stanley Street, Salford, M60 9LA
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