The Climate Change Levy and Negotiated Agreements

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The Climate Change Levy and Negotiated Agreements

• Russell Talbot
• Business Environment Officer
• GONW

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Contents

• The UKs Climate Change Programme
• Climate change, Kyoto
• The Climate Change Levy package
• Support for Business
• Negotiated Agreements
• Emissions trading

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Climate changeIts Getting Warmer
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Climate change The Environmental Reality
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Climate change the environmental reality in
Africa
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Climate change the environmental reality in the
UK
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Kyoto

• Developed nations to cut emissions of a basket
  of greenhouse gases
• CO2, N2O, SF6, HFCs, PFCs, CH4
• EU - 8 reduction in emissions from 1990 levels
  by 2008-2012 (commitment period)
• Act now to avoid worst effects
• Need to stabilise CO2 concentrations at 550ppm
  to allow growth in developing world

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Draft UK Climate Change Programme

• Detailed policy options - Kyoto beyond
• Estimates of costs effectiveness
• Gain not pain - maintain competitiveness
• Consultation period March- June
• Final version Autumn

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Draft Climate Change Programme

• Kyoto - need to cut greenhouse gas emissions by
  12.5
• Government target of 20 cut in CO2
• All parts of the economy have part to play
• More renewables, CHP
• New energy efficiency requirements in Building
  Regulations
• Transport - eg vehicle taxation
• Domestic emissions eg from appliances

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Climate change programme - policy measures for
business

• Economic instruments
• Climate Change Levy, emissions trading
• Regulation
• eg IPPC, Building Regulations
• Voluntary measures
• Best Practice, reporting of emissions

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Why A Levy?

• Marshall report - Economic instruments and the
  business use of energy
• Business wastes some 15- 20 of energy
• Economic incentive to improve energy efficiency
• Therefore CCL announced Budget 99

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Levy Design

• Levy will raise 1 billion
• 0.15 p/kWh gas
• 0.15 p/kWh coal
• 0.43 p/kWh electricity
• Oil exempt (attracts hydrocarbon oil duty)
• 0.07 p/kWh LPG
• Recycled to business via 0.3 NICs cut
• Revenue neutral to business - no gain to public
  sector
• Broadly neutral between industry and services

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Levy Design (2)

• New renewables exempt
• Good-quality CHP exempt
• consultation on good quality
• Exemption for electrolysis
• Exemption for fuels used as feedstocks
• Temporary 50 discount for horticulture
• Temporary exemption for gas in N Ireland

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Levy Design (3)

• 50 million - expand EEBPP small company advice,
  renewables, low carbon technologies
• 100 million enhanced capital allowances for
  investments in energy efficient technologies
• Emissions savings of 2.5 MtC/y from the levy
  package

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Enhanced Capital Allowances

• Full tax relief in year of purchase
• For energy efficient products on an approved list
• Can apply to purchases once list is published but
  tax relief can only be claimed after April 2001
• Approved list will be dynamic

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ECAs - Qualifying Technologies

• Motors ? Boilers
• Good CHP ? Lighting
• Variable speed drives
• Refrigeration ? Pipework insulation
• Thermal screens

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Negotiated Agreements

• Processes that are or would be IPPC Part A
• accounts for 60 of energy in manufacturing
• 80 reduction on headline levy rates
• Demanding targets for energy/CO2 reduction
• Robust monitoring and verification
• 2 yearly milestone targets, 4 yearly review of
  targets
• Full rate of levy if milestone targets missed

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Sectors - first wave

• Steel Foundries
• Chemicals Food and Drink
• Aluminium Ceramics
• Paper Cement
• Glass Non-ferrous metals
• Lime Brewing
• Indicative targets of 2.5MtC/y between them

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Emissions Trading

• Trading within agreements
• in sector agreements
• between sector agreements
• Wider emissions trading
• Emissions Trading Group proposal for companies
  outside agreements

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Timetable

• Budget - March 21 - final Levy design
• Finance Bill April - July
• Negotiations - all concluded by end 2000
• Start of levy on 1 April 2001

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How Will It Affect You?

• From April 2001, Climate Change Levy will be
  added to your bills, before VAT
• Typically it will result in a 10- 20 increase
  in price of energy

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What Can You Do About It ?

• Use energy more efficiently
• Invest in energy efficient equipment
• Invest in good quality CHP
• Purchase new renewables
• If eligible, join a sectoral negotiated agreement
• Seek advice from the Environment Energy
  Helpline, 0800 585794

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Contacts
Environment Energy Helpline, 0800
585794 www.energy-efficiency.gov.uk www.envirowi
se.gov.uk