New Climate Change Agreements scheme: What do you need to know?

The government has revealed much-anticipated details of the upcoming new Climate Change Agreement scheme. But what do they mean in practice?

What is the Climate Change Agreement (CCA) scheme?

This voluntary scheme allows holders of climate change agreements to claim a discount on the Climate Change Levy (CCL) – a tax on energy use in industry, commerce and the public sector. In turn, participants must meet energy efficiency improvement targets which have been agreed between government and sector associations.

A participating organisation must measure its energy use and carbon emissions and report against agreed targets over two-year target periods.

The CCA scheme is administered by the Environment Agency on behalf of the Department for Energy Security and Net Zero (DESNZ) for the whole of the UK.

What do we know about the new scheme so far?

The first Target Period under the new scheme will start on 1 January 2026.

This date is set to provide preparation time to complete data collection exercises, negotiate targets and lay the necessary legislation (subject to Parliamentary approval and timing) for the scheme.

The new scheme will have targets to the end of 2030 and provide CCL reduced rates for those meeting their obligations until March 2033.

According to the government response document, the new scheme is estimated to be worth c. £1.9bn in CCL reduced rates over the six years of the scheme.

Who is eligible?

• Existing participating facilities will not automatically be transferred to the new scheme.
• The government intends to take ‘a proportionate’ approach to assessing the eligibility of currently participating facilities. 
• All facilities will be asked to confirm that they meet the existing eligibility criteria (including eligibility under the appropriate sector process definitions) before the new scheme starts.
• Subsequently, a proportion of participants will be audited during the scheme to assess whether they meet existing eligibility criteria.
• Sectors and processes that expressed an interest in joining the scheme during the consultation will be assessed against eligibility criteria. The government has given an indicative timing of Spring 2025 for decisions from assessing the eligibility of any new sector and process to join the new CCA scheme.

What about new entrants in existing sectors?

• From 1 May-31 August 2025 new entrants from all currently eligible sectors can apply before the start of the new scheme using existing eligibility criteria as set out in the existing legislation. (Timings are subject to legislative requirements).
• New entrants in existing sectors will be able to join the scheme between 1 January to 31 August in every year throughout the scheme and will not be required to wait a minimum period before being certified to receive CCL relief.  

What about new sectors and processes?

• New sectors will not join the scheme from 1 January 2026. The government will provide further information for businesses in new sectors/processes on timings to join the scheme in due course.
• Parliamentary approval, legislative requirements and subsequent operational processes to assess new applications are likely to mean new sectors will not be able to join until 1 January 2027.

What are the relevant dates?

Target Period dates

• Target Period 1: 1 January 2026 to 31 December 2026.
• Target Period 2: 1 January 2027 to 31 December 2028.
• Target Period 3: 1 January 2029 to 31 December 2030.

Certification Period dates

• Certification Period 1: 1 July 2027 to 30 June 2029.
• Certification Period 2: 1 July 2029 to 30 June 2031.
• Certification Period 3: 1 July 2031 to 31 March 2033.

What else should I know?

Other features of the new CCA scheme include:

• The baseline year for targets will be 2022.
• ‘Bubbling’ will be removed. Currently multiple facilities a business operates can be grouped, or ‘bubbled’ together with one target applied to all. The new scheme will move to facility-level reporting.
  • The government intends to introduce ‘light touch’ annual reporting on energy usage and emissions data at the end of year one of a two-year Target Period (which will not be used to formally assess performance).
    • The introduction of additional reporting on energy efficiency and decarbonisation potential will not be taken forward, although the government will seek to collect information on such potential through the target setting process, as well as other schemes such as the Energy Savings Opportunity Scheme (ESOS).
• 70:30 rule: An annual self-certification will be required confirming facilities remain compliant with the threshold.
• More audits: The penalties available to the Environment Agency will remain the same as for the current scheme but the number of audits carried out in the new CCA scheme will be ‘significantly’ increased.
• Target Setting: Data will be collected from a representative sample of facilities from each sector to inform calculation of initial targets. Final targets will be agreed through bilateral negotiation between DESNZ and sector associations.
• Target types and managing performance: A unified target type will be introduced.
• Treatment of self-generated electricity: The multiplication factor for self-generated electricity will be updated to 1.0 and the carbon emissions factor will be 0 tCO2e/kWh.
• UK Emissions Trading Scheme (ETS) energy will not be included in CCA targets, but ETS data will be collected to inform target setting and improve the understanding of the decarbonisation journey of scheme participants.
• Energy Management Systems (EMS): ISO50001 or other EMS will not be mandatory for the new scheme. However, such systems are recommended as good practice, including for those covered by ESOS.

So, what does all this mean?

Whether you’re a seasoned CCA participant or completely new to the scheme, this announcement brings a lot of new information to take in.

Although applications for currently eligible sectors opening on 1 May 2025 seems far in the distance – this is only around six months away. The interest from organisations is going to be substantial.

An expert partner can help you navigate this changed scheme landscape to ensure you can claim your CCL discount. Inspired’s CCA service covers all requirements of the scheme. We can also support you with the efficiency, monitoring and on-site generation solutions to help you meet your CCA targets.

Where can I find more information?

The full government response document is available on the gov.uk website.