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Climate Change Agreements: Eligibility, CCL relief and scheme rules
There are currently 8,200 UK facilities that hold a Climate Change Agreement. In return for committing to improve their energy efficiency, these facilities get a discount on the Climate Change Levy (CCL) charged on their energy bills.
This guide explains how the Climate Change Agreement scheme works and the opportunity it offers businesses. Here’s what we cover:
- What is a Climate Change Agreement?
- How does a Climate Change Agreement work?
- Climate Change Agreement performance and certification periods
- Climate Change Agreement eligibility requirements
- How much is the Climate Change Agreement discount on the CCL?
- How to get a Climate Change Agreement
What is a Climate Change Agreement?
A Climate Change Agreement (CCA) is a voluntary agreement between an energy-intensive business and the UK Government.
In return for agreeing to targets to improve energy efficiency and reduce carbon emissions, a business receives a discount on the Climate Change Levy (CCL), an environmental tax added to business energy bills.
Participants can currently receive a discount of 0.737p/kWh on business electricity prices and 0.713p/kWh on business gas prices for energy used at eligible facilities.
How does a Climate Change Agreement work?
This section explains the cycle of targets and reporting that Climate Change Agreement holders follow.
Holders of a Climate Change Agreement are given specific energy efficiency targets, based on units of production, for their facilities.
Holders must measure and report their energy efficiency at regular intervals. This determines whether they can continue to receive a discount on the Climate Change Levy.
Here’s how the process works:
1. Energy efficiency targets are set
For each period of the scheme, the government sets the CCA holder specific energy efficiency targets linked to the goods they produce.
These targets are defined as the weight of carbon dioxide equivalent emissions per unit of production.
Targets are set on a sector-by-sector basis through negotiation with the trade association that administers the scheme for each eligible sector. The targets become gradually more challenging with each performance period of the scheme.
2. Performance measurement
Throughout the performance period, the participating business must collect the following data for each of its facilities covered by a Climate Change Agreement:
- Consumption data from business gas meters.
- Consumption data from half-hourly electricity meters.
- Relevant sub-metering data for eligible processes.
- Consumption data for other fuels.
- Production output data, measured in the same units as defined in the CCA.
This data is used to measure the energy and carbon efficiency of each facility.
Evidence for each of these must be kept for Environment Agency audits.
3. Reporting requirements
The participating business sends this performance data to its trade association, which is then responsible for submitting it to the Environment Agency.
The reporting requirements are:
- Interim report: A light-touch report prepared after the first year of a two-year performance period. It only gives the government and the participant an estimate of current performance against the targets.
- Performance report: A full report covering the whole performance period, due by 1 May following the end of that period.
This reporting gives the Environment Agency the energy consumption and production data it needs to assess performance against the targets.
4. Assessment against target
The Environment Agency assesses each facility’s actual performance against the target set out in its Climate Change Agreement.
The possible outcomes of this assessment are:
| Result | What happens |
|---|---|
| Target met or beaten | The surplus (in tCO₂e) is banked and can be used against later target periods in the scheme. The facility is recertified automatically. |
| Target missed and buy-out paid | The shortfall is covered first by any banked surplus, then by a buy-out fee (tCO₂e × buy-out price). Paying the fee means the facility is recertified. |
| Target missed and buy-out not paid | The facility is decertified and loses its CCL discount. |
5. Buy-out mechanism
The CCA scheme allows participants who miss their targets to pay a buy-out fee for each tonne of carbon dioxide equivalent (tCO₂e) they emit above their target.
In the most recent target period (TP6):
- 1,766 target units (54.5%) failed to meet their improvement targets.
- 1,502 of these paid the buy-out fee of £25 per tCO₂e above target.
- The buy-out fees raised £40.2 million for the government.
The remaining 264 target units were decertified and lost their reduced rate of Climate Change Levy.
Climate Change Agreement performance and certification periods
The table below shows the current target periods and how they link to reporting deadlines and CCL relief.
| Target period | Report due | CCL discount (certification) period |
|---|---|---|
| TP7: 2026 | 1 May 2027 | CP8: 1 July 2027 to 30 June 2029 |
| TP8: 2027 to 2028 | 1 May 2029 | CP9: 1 July 2029 to 30 June 2031 |
| TP9: 2029 to 2030 | 1 May 2031 | CP10: 1 July 2031 to 31 March 2033 |
TP7 is a shortened performance period because it is the first year under the new scheme rules.
Climate Change Agreement eligibility requirements
This section explains the two key eligibility requirements for CCL relief under the Climate Change Agreement scheme.
Eligible energy-intensive activity
A business must carry out a specific energy-intensive industrial process. This must be either:
- An industrial activity covered by the Environmental Permitting Regulations.
- An industrial activity specifically defined as an eligible process in the CCA legislation.
In practice, every sector with eligible activities is covered by an umbrella agreement with a trade association. Each umbrella agreement defines which activities in its industry are covered.
We explain how these umbrella agreements work further down this page.
Energy used by the eligible process
Where sub-metering shows that at least 70% of the energy used at a facility relates to an eligible process, all of the facility’s energy consumption is eligible for the CCL discount.
Where less than 70% of the facility’s energy is used by the eligible process, only the energy used by that process is eligible for the discount.
How much is the Climate Change Agreement discount on the CCL?
Climate Change Agreement holders receive the following discounts on the main rates of the Climate Change Levy:
| Fuel | Main CCL rate 2026/27 | Main CCL rate from 1 April 2027 | CCA discount |
|---|---|---|---|
| Electricity | 0.801p/kWh | 0.827p/kWh | 92% |
| Gas | 0.801p/kWh | 0.827p/kWh | 89% |
| LPG | 2.175p/kg | 2.175p/kg | 77% |
| Solid fuels (such as coal) | 6.264p/kg | 6.468p/kg | 89% |
How to get a Climate Change Agreement
This section explains the steps an eligible business needs to take to apply for a Climate Change Agreement.
1. Contact your trade association
Applications for a Climate Change Agreement are made through the trade association that holds the umbrella agreement for your sector.
The process starts with registering your interest with the relevant trade association. A full list of umbrella agreements is available on GOV.UK.
2. Apply through your trade association
Each trade association has its own application process and forms for obtaining a Climate Change Agreement.
The following documents are typically required:
- Eligible activity description: A description of the site where the eligible activity takes place, including what is produced there.
- Process flow diagram: A document explaining the industrial processes at the site.
- Site plan: A document showing the layout of the site, including a description of its plant and equipment.
- Details of directly associated activities: A list of auxiliary equipment at the site that uses energy but is not part of the eligible process, such as compressors and control rooms.
- Energy consumption data: 12 consecutive months of energy and throughput data for the site.
- Eligibility assessment: A calculation showing the proportion of the site’s energy consumption that relates to the eligible activity.
3. Application review and submission to the Environment Agency
The trade association assesses the application. If it is accepted, the trade association submits it to the Environment Agency.
If the Environment Agency approves the application, it issues a Proposed Underlying Agreement for the trade association and applicant to review.
Once the applicant accepts this, they formally enter into a Climate Change Agreement.
4. The Environment Agency issues a reduced rate certificate
Once a Climate Change Agreement starts, the qualifying facility is added to the Environment Agency’s reduced rate certificate register, which is published on the data.gov.uk website.
The facility must appear on this register before the business can complete the HMRC forms.
5. Complete HMRC forms
The business completes two forms:
- PP10 (sent to HMRC): A form that works out what percentage of a site’s energy supply qualifies for the CCL discount.
- PP11 (sent to the registered supplier): A form sent to the business energy supplier that supplies the property.
The forms are valid for five years by default, but must be completed again if the site switches business energy supplier or if the qualifying percentage changes.
6. Billing starts at the lower CCL rate
The commercial electricity supplier or business gas supplier must process the PP11 within five working days of receiving it.
From then on, every bill for the site will use the relevant lower rate of the Climate Change Levy.
If the site does not meet the 70% threshold, the supplier will split the consumption at the relevant MPAN or MPRN according to the percentage calculated on the PP10 form.
CCA umbrella agreements
The Climate Change Agreement scheme is made up of approximately 50 umbrella agreements between the Environment Agency and the trade associations of eligible sectors.
Each umbrella agreement commits the sector to a percentage improvement in energy efficiency for its eligible processes.
The umbrella agreements give trade associations the following responsibilities:
Negotiating targets
Trade associations provide data to the Department for Energy Security and Net Zero (DESNZ), which uses it to set energy efficiency targets for the sector.
Each trade association negotiates and agrees a percentage improvement target for each period. This target applies to every CCA holder in its sector.
Acting as scheme gatekeeper
The trade association handles all applications from new entrants and checks that their processes are eligible before passing the applications on to the Environment Agency.
Reporting data
Trade associations collect all energy use and production figures for participating businesses in their sector.
They are responsible for entering this data into the Environment Agency’s portal for each facility.
Charging administration fees
Trade associations usually recover the cost of administering the CCA scheme by charging fees to participating businesses.
The fee is typically a percentage of the relief claimed through the scheme, plus the fixed annual charge set by the Environment Agency.
Who is involved in administering the Climate Change Agreement scheme?
The following organisations are involved in administering a Climate Change Agreement:
- The operator (the business): Runs the facility, meters and records its energy use and output, and pays scheme fees and any buy-out fees.
- The trade association: Processes new applications and submits the business’s data to the Environment Agency through its online portal.
- The Environment Agency: Checks the performance of participants across the UK, issues the reduced rate certificates that confirm which facilities receive the discount, carries out audits and enforces the rules.
- The licensed energy supplier: Applies the reduced CCL rate to business electricity bills and business gas bills.
- HMRC: Oversees energy suppliers to make sure the correct amount of Climate Change Levy is collected from customers.
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