Explanatory note

These Regulations revoke and remake the Climate Change Agreements (Energy-Intensive Installations) Regulations 2006 (S.I. 2006/59) (“the EII Regulations”), and amend the Climate Change Agreements (Eligible Facilities) Regulations 2012 (S.I. 2012/2999) (“the EF Regulations”) and the Climate Change Agreements (Administration) Regulations 2012 (“the Admin Regulations”) (S.I. 2012/1976).

The Regulations concern the scheme providing for a reduced rate of climate change levy (CCL) established under Part IV of Schedule 6 to the Finance Act 2000 (c. 17). Under the scheme, the reduced rate will apply to facilities that have entered into a climate change agreement (a voluntary agreement between such a facility and the Environment Agency) and have met agreed targets for their energy use or emissions in target periods. If a facility does not meet any target for a target period it may pay a buy-out fee on each tonne of carbon dioxide equivalent by which it falls short of meeting that target, and thus remains eligible for the reduced CCL rate. To enter into a climate change agreement, a facility must be an installation and must meet the criteria set out in the EF Regulations.

Installations are described in paragraph 51 of Schedule 6 to the Finance Act 2000. These Regulations amend the scope of the types of installations covered by paragraph 51 as provided for by the EII Regulations. The EF Regulations require installations falling under the EII Regulations to carry on an eligible process in order to be a facility. These Regulations consolidate and clarify these requirements.

The Admin Regulations deal with the administration of the scheme, including the formula for calculating the buy-out fee. These Regulations correct one of the figures included in that formula.

Regulations 2 to 4 provide for definitions previously contained in the EF Regulations for the purpose of interpreting these Regulations. Where those definitions refer to provisions in European Union (EU) legislation (or those provisions contain cross-references to other provisions in EU legislation), their reading has been modified where necessary to ensure they are operable in light of the United Kingdom’s withdrawal from the EU. The modified reading of these provisions applies only for the purposes of interpreting these Regulations.

Regulation 5 sets out the types of installations covered by paragraph 51. It requires that installations are of a type set out in the Schedule and carry on a corresponding eligible process set out in the Schedule. Paragraphs 1 to 38 of the Schedule combines the descriptions of installations and eligible processes included in the EII and EF Regulations. Paragraph 8 of the Schedule to the EII Regulations, which provided for any installation not otherwise covered by paragraph 51 to be an installation, has been removed. Paragraphs 39 to 41 of the Schedule provide for new types of installations carrying on new types of eligible processes to be covered by paragraph 51. They relate to installations for—

1. (a)

   the mechanical recycling of plastic;

2. (b)

   the packaging of spirits; and

3. (c)

   the production of automotive grade battery cells.

Regulation 6 makes consequential amendments to the EF Regulations.

Regulation 7 amends the figure “H” (the carbon emission factor for gas) used in the formula to calculate the buy-out fee set out in regulation 12 of the Admin Regulations.

Regulation 8 consequentially amends the Climate Change Agreements (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/1848) and revokes the EII Regulations.

A Tax Information and Impact Note covering this instrument will be published on the website at https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins.