Environmental Audit Committee

Environmental Audit Committee

House of Commons

10 October 2007




NEW EVIDENCE SESSION

Reducing carbon emissions from UK business:

The role of the Climate Change Levy and Agreements

This is the first evidence session on Reducing carbon emissions from UK business: The role of the Climate Change Levy and Agreements. Further evidence sessions will be announced in due course.

Tuesday 16 October 2007, Committee Room 16:

10.20
EEF

11.05 (approx)
Chemical Industries Association
SABIC Europe
British Cement Association
UK Emissions Trading Group
Society of Motor Manufacturers and Traders Ltd

The Committee normally meets in a committee room at Westminster. These sessions are open to the public on a first come, first served basis. There are often last minute changes of room and meetings may be held either in the Palace of Westminster or in Portcullis House. Those wishing to attend should check the venue by calling the committee office information line the day before the hearing on 020 7219 2033.

Notes for Editors

1. The CCL and CCA were announced in 1999 and introduced in 2001, following recommendations in the 1998 Marshall Report. The Levy is a tax on energy use in industry, commerce and the public sector. Its aim is to encourage businesses to use energy more efficiently, and therefore to reduce carbon emissions below the levels that they would otherwise have been under "Business As Usual" growth. Under Climate Change Agreements energy-intensive sectors may receive an 80% discount on the Levy, in return for entering into agreements to meet energy efficient targets. In addition, at the time the CCL was brought in, organisations subject to the Levy were given a 0.3% reduction in their National Insurance contributions, to help to shift their tax burden from labour to energy costs.

2. The NAO study, The Climate Change Levy and Climate Change Agreements (August 2007, available from www.nao.org.uk), found that:

Climate Change Levy

The announcement of the Levy contributed to a significant refocusing of attention on energy use in the years after 1999. This has driven energy efficiencies and emissions reductions relative to business as usual in both energy intensive and less intensive industries.

The extent to which the Levy has continued to drive further energy efficiencies in more recent years is harder to discern, especially as it has been joined by other policies and drivers since its introduction. Econometric analysis suggests the Levy has permanently raised managerial awareness. However, its impact on energy prices has been limited. Results of the NAO's survey, conducted in early 2007, suggest it is no longer seen as a major driver of new energy efficiencies.

The cumulative carbon savings achieved by the Levy across the economy cannot be measured; only estimated. The balance of qualitative evidence broadly supports the major assumption which underlies the most recent estimate of annual savings of 3.5MtC in 2010.

Climate Change Agreements

Sectors subject to Agreements have made energy efficiencies and emissions reductions. The negotiation of Agreements and the development of monitoring regimes to measure progress against Agreement targets raised awareness of the potential for energy efficiencies. These efficiencies were then made.

Not all Agreement targets were stringent, but early overachievement against them was the result of genuinely significant improvements in efficiency as much as weak targets.

As with the Levy, the effect of the Agreements in terms of emissions savings can only be estimated. The NAO found no evidence which would undermine the most recent estimate of 2.9MtC.

3. Details of all the Committee's press releases and inquiries, together with its Reports, oral evidence and other publications, are available on the Committee's Internet home page, which can be found at: www.parliament.uk/parliamentary_committees/environmental_audit_committee.cfm.