Evaluation of second Climate Change Agreements scheme

Cambridge Econometrics, in partnership with CAG consultants, Winning Moves and University College London, have completed the evaluation of the second Climate Change Agreements scheme on behalf of the UK government’s Department for Business, Energy and Industrial Strategy (BEIS). The evaluation comprised micro-econometric analysis and macro-economic modelling, as well as qualitative and quantitative research and analysis of CCA scheme data.

The CCA scheme is a voluntary scheme for firms in certain energy and trade-intensive industry sectors, which offers discounts on the Climate Change Levy (CCL) in exchange for firms meeting targets for carbon or energy efficiency improvements. Forming part of the Government’s Clean Growth Strategy, the scheme aims to support the retention of energy-intensive industries in the UK while improving the energy efficiency of these industries. The second CCA scheme started in 2013 and an extension of the scheme was announced in the recent Government budget.

The evaluation found that the CCA is a well-established scheme that is popular with industry, with effective systems in place for delivery. Slightly more than half of target units in the scheme met their targets in the first three target periods of the second CCA scheme (between 2013 and 2018) and almost all CCA participants had taken action on energy efficiency since the start of the scheme. Although there are many influences on energy efficiency, micro-econometric evidence found that electricity consumption on CCA sites was at least 4% lower than on similar sites subject to the CCL, implying that the scheme was achieving its energy efficiency objectives. The evaluation evidence indicated that the scheme had more additionality where targets were more consistent, challenging and were supported by evidence agreed with the relevant sector association.

Macro-economic modelling found that the scheme made a contribution to the competitiveness of energy industry in the UK, defined in terms of increased Gross Value Added. The scheme was found to have more influence on the competitiveness of firms facing greater international competition, including those owned by international companies, and on those in highly energy-intensive sectors that were not already exempt from CCL under the mineralogical-metallurgical exemption (e.g. chemicals, plastics). Overall, the benefits to society outweighed the costs of the scheme, although restricting the scheme to more energy- and trade-intensive sectors could improve cost-effectiveness further.

Sophie Heald Associate Director sh@camecon.com