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3 energy-efficiency incentives you need to know about

In accordance with the 2008 Climate Change Act, the government aims to reduce UK greenhouse gas emissions by at least 80% (from 1990 figures) by 2050. In order to achieve this, businesses are being encouraged to reduce their carbon emissions via a series of schemes. Here we look at three of them.

Climate Change Levy (CCL)

This is a tax on energy supplied to non-domestic UK users, designed to encourage energy efficiency and reduce carbon emissions. Businesses within certain energy-intensive sectors are eligible to enter into a voluntary Climate Change Agreement (CCA) which allows them to reduce their CCL by as much as 90%. In order to receive this discount, businesses must agree to achieve certain energy-efficiency targets.

There are two rates available – the main rates and the carbon price support (CPS) rates.

Main rates

Main rates are paid by businesses in the industrial, commercial, agricultural and public services sectors and apply to electricity, gas and solid fuels including lignite, coke and petroleum. Charities and businesses using only small amounts of energy are exempt from paying the main rates of CCL.

  • Electricity: 0.541p per kW hour
  • Gas: 0.188p per kW hour
  • Gas supplied in a liquid state: 1.210p per kilogram.

CPS rates

These rates apply to owners of electricity generating stations and operators of combined heat and power (CHP) stations. Liable fuels are gas, liquefied petroleum gas (LPG) plus coal and other solid fossil fuels.

  • Gas: 0.175p per kW hour
  • LPG: 2.822p per kilogram
  • Coal and other solid fossil fuels: 81.906p per gigajoule on gross calorific value (GCV).

CRC Energy Efficiency Scheme

Previously known as the Carbon Reduction Commitment, CRC is a compulsory government scheme which encourages high energy users to increase efficiency and cut carbon emissions. The scheme covers all organisations (except state-funded schools in England) that use more than 6,000MWh of electricity per year because these sectors are responsible for over 10% of the UK’s CO2 emissions. The scheme intends to reduce non-traded carbon emissions by 17 million tonnes by 2027.

Participating organisations are required to measure, record and report their electricity and gas-related carbon emissions on an annual basis. To cover their reported emissions, participants must buy allowances from the government for every tonne of carbon emitted, so companies that cut emissions will therefore lower their costs. There are two sales of allowances for each compliance year, the first based on predicted emissions and the second on a ‘buy to comply’ basis at the end of the period.

Companies not complying will face cumulative financial penalties.

Enhanced Capital Allowances (ECAs)

ECAs allow organisations to claim a full first-year capital allowance on investments in certain energy-saving equipment. The scheme means businesses may write off the cost of new machinery, such as energy-efficient electric motors, against their taxable profits in the year the equipment was bought. The main annual rate for allowances is 18%, and there’s a special rate of 8% per year for certain items such as thermal insulation and long-life assets.

A list of eligible energy-saving equipment is reviewed annually and changes are ratified by Parliament.

Companies taking advantage of the ECA scheme benefit from improved cash flow, reduced energy bills and lower CCL and CRC payments.

If you’re looking to reduce carbon emissions from your plant or process, get in touch with Gibbons. We provide energy-efficient electric motors, pumps, variable-speed drives and more to businesses within all sectors and our expert engineers will help you satisfy the latest legislation, save money and reduce your carbon footprint. Call 01621 868138 or email for more information. 

Variable-Speed Drives, Electric Motors, Pumps & Controls

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