Climate change agreements: the CCA scheme for 2026 to 2030

Climate change agreements are voluntary agreements between UK operators and the Environment Agency. A facility opts in, agrees energy efficiency or carbon targets, and in exchange pays a reduced rate of Climate Change Levy (CCL) on its electricity and fuel.

The mechanism is a tax relief, not a reporting duty. Under paragraph 44 of Schedule 6 to the Finance Act 2000, a supply of energy is a “reduced-rate supply” if it goes to a facility certified as covered by a climate change agreement for that period.

There are two layers. An umbrella agreement is held between a sector association and the Environment Agency and lists the eligible processes. An underlying agreement is held by the operator for its facility and carries the facility's own target.

Those roles are set out in the April 2026 tax information and impact note on the scheme. The scheme is a carbon and energy management incentive, not a carbon tax: the UK has no instrument by that name.

The previous scheme's last target period, target period 6, ended on 31 December 2024. The government confirmed a new six-year scheme in its October 2024 response to the consultation on a new scheme, then moved the first target period back a year to 1 January 2026 to allow time for data collection and target setting.

The target periods are now in law. SI 2025/813, regulation 2, amends the 2012 Administration Regulations to define them.

The Environment Agency must administer the scheme through to 31 March 2033, according to the CCA statutory guidance 2026. Certification period 7 has been extended to 30 June 2027, so facilities certified under the old scheme keep their reduced rates into the new one.

Eligibility turns on the process, not the size of the company. A facility must carry out a process listed in an umbrella agreement. Under regulation 3(1)(a) of the Eligible Facilities Regulations, at least 70% of the reckonable energy supplied to the facility must be intended for use in the eligible installation or installations on the site. Operators confirm this 70% rule every year in their performance report. Neither the Regulations nor SI 2026/826 set an energy-intensity or import-penetration percentage.

Where less than 70% of site energy goes to the eligible installation, the installation must be permanently sub-metered. Energy used in UK ETS processes counts towards the 70% test.

Drawing the facility boundary: the 3/7 rule

The statutory guidance turns the 70% test into a working rule. Other activities on the site can be brought inside the facility if they use no more than 3/7ths of the reckonable energy the eligible installation uses, and if they are included they should be permanently sub-metered too. A kiln using 700 MWh a year can carry up to 300 MWh of other site activity, because 700 is 70% of the 1,000 MWh total. Add a warehouse using 350 MWh and the eligible share falls to about 67%: the site as a whole fails, and the facility has to be drawn round the kiln and sub-metered.

Three processes join from 1 January 2027. SI 2026/826, made on 7 July 2026, admits them through paragraphs 39 to 41 of its Schedule:

To join, apply through the sector association for your process. New entrants in existing sectors can apply between 1 January and 31 August in each year from 2026 to 2029. A new facility must be added to its agreement before 1 January 2030.

Targets under the new scheme are set at facility level. The old practice of grouping sites into a single “target unit” has gone. All three target periods are measured against a 2022 base year, and operators had to supply at least 12 months of continuous, representative 2022 data for each facility.

A facility that meets its target for a period, or pays the buy-out fee, remains eligible for the reduced CCL rate. Reporting deadlines for each target period are set in the Environment Agency's scheme guidance.

A facility that misses its target can pay a buy-out fee on each tonne of carbon dioxide equivalent by which it falls short, and remain eligible. For target periods 1 to 6 the price per tonne was a fixed figure. From target period 7 it is set by a formula in regulation 12 of the Administration Regulations, linked to the CCL main and reduced rates for electricity and gas in force on 1 April of the target period's first year, and converted with fixed carbon emission factors. SI 2026/826 regulation 7 changes one of those factors, “H”, the carbon emission factor for gas, from 0.0497 to 0.0498 from 1 January 2027.

Timing matters as much as the price. The statutory guidance says that where an operator pays a buy-out fee after a new certification period has started, the facility is certified as eligible for relief only from the date the payment is received. A late payment therefore costs the levy discount for the days in between, on top of the fee.

UK ETS-covered fuel is excluded from the energy against which CCA targets are set and buy-out is calculated, so the two schemes do not charge twice on the same energy. Operators still report their UK ETS energy.

The Climate Change Levy is a tax on energy supplied to non-domestic users. CCA holders claim the reduced rate from their energy supplier, who charges the levy at a percentage of the main rate. The rates below are from HMRC's Climate Change Levy rates page.

Put the other way round, a CCA facility pays 8% of the main rate on electricity and 11% on gas, as HMRC's note on the April 2026 rates sets out. The reduced rates stay a fixed percentage of the main rates, so when the main rate rises, so does the amount a CCA holder pays.

Worked example: what the discount is worth to one site

Take a facility using 10 GWh of electricity and 20 GWh of natural gas a year, all of it on a reduced-rate supply. The arithmetic uses only HMRC's published rates and discounts.

That saving is what a missed target puts at risk, and it is the figure to set against any buy-out fee. It leaves out Carbon Price Support, which HMRC lists separately with its own rates.

This is where energy-intensive groups most often go wrong. The Environment Agency's ESOS phase 4 guidanceof 30 July 2026, at §4.5, lists the UK ETS, CCAs, SECR, Green Deal Assessments and Display Energy Certificates, and says participation in them “does not automatically count as ESOS compliance for the energy covered by those regimes”. The data helps; the ESOS duty remains.

Appendix C to the Phase 4 guidancesets out the CCA data route. It says the CCA milestone data can be used as part of the ESOS assessment, that audits done to meet CCA targets could feed into ESOS, and that such an audit may count as an ESOS compliant energy audit provided it was conducted, verified or reviewed by a qualified lead assessor and meets the ESOS minimum standards. It then warns that the participant will need to extend its data processes to “any additional on-site energy use and sites that are not part of the CCA target unit”.

Worked example: a group with two CCA sites

A UK food group qualifies for ESOS Phase 4 on 31 December 2026. It has two factories in a CCA, a third factory outside it, a head office and a delivery fleet. Its CCA facilities report energy for target period 7, which is calendar 2026: a 12-month period that includes the qualification date and ends before 5 December 2027, so it can anchor the ESOS reference period.

The CCA covered perhaps two of five lines. The group still needs the whole-group energy total, a lead assessor review, the ESOS report, director sign-off and a notification through MESOS by 5 December 2027. Our ESOS guide sets out every Phase 4 duty, and our ESOS energy audit guide covers what a lead assessor will expect of an audit reused from a CCA.

A CCA is voluntary relief. ESOS and SECR are mandatory duties. A company can be outside the CCA scheme and still owe SECR or ESOS, and holding a CCA is not evidence of compliance with either.

If you run a certified energy management system, see ISO 50001 vs ESOS. Company disclosure is covered on our SECR page, and the difference between the two mandatory regimes on ESOS vs SECR.

Many CCA sites also sit in the UK Emissions Trading Scheme. The Environment Agency's biennial CCA progress report records the move to facility-level targets and the new scheme dates.

A CCA means different work for a site already in the scheme, a business in one of the three new processes, and a large group that also owes ESOS. Pick the description that fits.

The timeline marks what has passed and what comes next as of the day you read it. The ESOS dates are included because many CCA holders are in large groups that qualify.

Climate Change Levy (CCL)FA 2000 Sch 6

The tax on energy supplied to non-domestic users that a CCA reduces.

Reduced-rate supplySch 6 para 44

A supply to a facility certified as covered by a CCA, charged at a percentage of the main CCL rate.

Umbrella agreementCCA

The agreement between a sector association and the Environment Agency that lists the eligible processes.

Underlying agreementCCA

The operator’s agreement for its own facility, carrying the facility’s target.

FacilitySI 2012/2999 reg 3

An installation or site at which at least 70% of the reckonable energy supplied is intended for the eligible installation.

Reckonable energySI 2012/2999

The energy counted in the 70% eligibility test, including energy used in UK ETS processes.

Target periodSI 2012/1976 reg 2

A period over which a facility’s performance is measured: TP7 is 2026, TP8 2027–28 and TP9 2029–30.

Certification periodCCA

The period for which a facility is certified to receive the reduced CCL rate; CP7 runs to 30 June 2027.

Buy-out feereg 12

A payment per tonne of CO2e by which a facility misses its target, keeping it eligible for relief.

Factor Hreg 12(3)(h)

The carbon emission factor for gas in the buy-out formula: 0.0497, becoming 0.0498 from 1 January 2027.

Milestone dataESOS Appendix C

The CCA performance data that the ESOS guidance says can be used in an ESOS assessment.