Climate Change Agreements in the UK

Blurb

With support from Johannes Ackva, Costanza Ghera and Emma Flanagan Martin.

The United Kingdom has been a global forerunner in climate policy. The Climate Change Agreement (CCA), packaged together with the Climate Change Levy (CCL), is one of the oldest climate policies in the UK and is one of the key instruments to deliver both its carbon budget targets as well as its clean growth strategy. CCL is an energy tax on the consumption of electricity (excluding renewable electricity and combined heat and power, but including nuclear), coal, natural gas, and liquefied petroleum gas to a broad scope of non-domestic energy users. CCAs are voluntary agreements in which eligible industrial sectors commit to energy efficiency or carbon reduction targets and, in turn, enjoy a discount to the levy. This discount currently sits at 90% for electricity and 65% for gas and other fuels. According to the bi-annual performance reports under the CCA, there have been a considerable amount of carbon emissions savings compared to baseline year levels (i.e. between 3.1 and 10.5 million tonnes CO2 (MtCO2)/year). The short case study gives an overview of the functioning of CCA, its interlinkages with other policies, and impacts and analyses its success factors and transferability to Germany.

Germany enjoys a relatively high level of comparability with the UK regarding the economic, political and administrative context, climate ambition as well as a similar industrial energy fuel mix. Introducing a CCA-type instrument, a voluntary agreement in combination with a ‘credible threat’, in Germany has potential to enhance the industrial sector’s mitigation efforts. This may be done via two potential pathways: introducing CCA as a pre-condition for energy-intensive industries to the entitlement of exemption or discount from existing energy surcharges or a new carbon tax; or using CCA as a reference to strengthen and modify the relatively new Energy Efficiency Networks initiative which is currently designed as a pure ‘carrot’ approach.

The present study forms part of a series of publications within the project “Bridging European and Local Climate Action (BEACON)”. As part of this project, scientific analyses were conducted of national policy instruments that successfully led to greenhouse gas emission reductions in European countries in the building, transport, agriculture and small-industry sectors. The analyses particularly focused on the instruments’ effectiveness and their potential transferability to the German context.