By Sarah Anderson
We are all aware of the pending environmental crisis that is waiting around the corner and our need to cut our carbon emissions. It has been reported that while emissions dropped for the 6th year running (to 361m tonnes of Co2) in the UK in 2018, those reduction margins have shrunk to an estimated 1.5% – down from an 8.7% decline back in 2014. This plateau has suggested signs of complacency regarding climate change action with some saying that ‘the UK will not be able to meet its legally-binding climate goals in future without progress across all fuels and sectors.’
Businesses have an important role to play in this – according to the UK government ministerium, the Department for Business, Energy and Industrial Strategy, the business sector accounted for 18% of the UK’s carbon emissions in 2018.
Since the 1st April 2019, the UK government has upped the ante on business carbon emissions and has changed its policy to aid the reduction of certain organisations’ carbon footprint.
Beforehand the UK government’s Carbon Reduction Commitment Energy Efficiency Scheme (CRC Energy Efficiency Scheme) aimed to incentivise energy efficiency in large energy users by requiring them to monitor their energy use and ‘purchase or surrender allowances’ of it. They also produced a league table of the best and worst offenders.
Climate Change Levy
The Climate Change Levy (CCL) was introduced to the UK in April 2019 to replace the CRC. It is designed to streamline the process as well as encourage businesses to work harder at improving their energy efficiency.
It is essentially a tax on the use of energy, including gas, electricity, petroleum coke and coal, and the main difference between the two initiatives is that the prices have gone up.
The levy applies to businesses who are in the agricultural, commercial, industrial and public services sectors, and who have an electricity consumption of over 1000kWh per month, and gas of over 4397kWh per month.
The transport industry is the third sector usually exempt from the levy.
The new rates in the CCL are significantly higher than the previous costs to business, and so, as we near four months into the new scheme, it is important that UK businesses are prepared for it.
- Electricity rates have increased by 45% from 0.58p/kWh to 0.85p/kWh
- Gas rates have increased by 67% from 0.20p/kWh to 0.34p/kWh
This is a substantial rise and will likely catch many businesses in the United Kingdom out.
Impact of the CCL on SMEs in the UK
It looks likely that the energy tax bills for UK SMEs will be significantly higher, and this is why they must be prepared.
The UK government is consulting on a new energy efficiency scheme for SMEs, so seems that they are aware that these costs could end up being difficult for SMEs to swallow.
There are some caveats that could mean that an SME doesn’t have to pay some or all of the levy, for example, if:
- The business uses a lot of energy
- The businesses don’t use much energy
- Businesses have invested in energy-saving technology
Impact of the CCL on larger enterprises in the UK
For larger UK enterprises, it is expected that some of them will be better off initially as they won’t have to pay the two taxes side by side. It is also hoped that larger businesses have been able to plan and budget more effectively for the introduction of the CCL.
Some businesses are registered with the CCA (Climate Change agreement), which allows them to get discounts on the CCL, getting savings of up to 90%. If they are eligible, this is a very effective way to help to reduce the impact of the CCL on larger businesses.
Reducing the impact of the CCL on your UK business
Regardless of the size of your business, there are ways that you can reduce the impact of the CCL on your UK enterprise.
1. Be more energy efficient
Of course, the most effective way to cut your CCL bill is to reduce your energy use and be more energy-efficient. Take stock of how energy efficient your business is – either yourself or through an expert who can carry out a commercial energy audit.
According to Nexus Energy Solutions, “A good audit could lead to a significant reduction in energy use (wastage). In most cases, the costs reduce by as much as 10% to 40%.”
They will not only be able to tell you how your business is doing at the moment but also help you to find ways of becoming more energy efficient.
2. Get into greener habits
Try to get yourself and employees into greener habits. This could be as simple as ensuring that lights and computers are turned off at night, recycling paper or encouraging walking or taking public transport to work.
3. Check your Tariff
It is true that many of us are paying over the odds for our energy anyway. If you haven’t checked it recently, do some price comparisons to ensure that you are getting the best tariffs for your energy.
4. Schemes and Funds
The Carbon Trust has set up a number of schemes and funds to help businesses reduce their energy use. Have a look into these to find out if your business is eligible.
5. Keep on top of CCA data
By keeping on top of your data for the CCA you can ensure that you remain eligible for their discounts as well as avoid any unnecessary fines.
Climate change is a complex and ongoing issue and we must all do our bit to aid continued progress in the world today. While there are finance-led ways to reduce your CCL bill in the UK, the ideal is to do what you can to get your business more energy efficient.
Sarah Anderson is a freelance writer and CSR consultant. She is passionate about informing on how UK businesses can take the next steps in developing a well-rounded CSR strategy and discover a purposeful cause. When she isn’t researching or writing, she can be found on the coast enjoying long walks with her lurcher or at the forefront of a local beach clean.