The Climate Change Agreements (Administration and Eligible Facilities) (Amendment) Regulations 2025
These regulations amend the 2012 Climate Change Agreements (Administration) and (Eligible Facilities) Regulations to extend the scheme's reach to 2030.
Key changes include updating the calculation of buy-out fees with a new formula, clarifying definitions related to emissions and facilities, and introducing new requirements for information provision and reporting.
The regulations also extend the eligibility period of the Climate Change Agreements (Eligible Facilities) Regulations to 2033, refine the calculation of reckonable energy from renewable energy sources, and clarify definitions around biomass and other fuels.
A transitional provision ensures the amendments apply only to target periods from 2026 onwards.
Arguments For
Extended Coverage: The regulations extend the Climate Change Agreements scheme to 2030, providing continued support for emissions reduction efforts beyond the initial timeframe.
Improved Accuracy: The amendments refine the calculation of buy-out fees and reckonable energy, enhancing accuracy and fairness in the application of the scheme. This is supported by the move to facility-based targets for increased precision.
Enhanced Transparency: The updated information requirements promote better transparency and accountability for participants in the scheme.
Legal Basis: The regulations draw their authority from the Finance Act 2000, providing a firm legal grounding for the changes.
Environmental Benefits: By establishing clearer rules and extended timelines, The regulations aim to drive further greenhouse gas emission reductions, contributing to wider climate goals.
Arguments Against
Administrative Burden: The increased information requirements and more complex formula for buyout fees may impose a heavier administrative burden on participating facilities.
Cost Implications: Increased scrutiny and reporting requirements, and potential buy-out fees could raise costs for industries participating in the Climate Change Agreement scheme.
Implementation Challenges: Effective implementation requires robust systems and processes to manage data and ensure accurate calculations. Delays or errors in implementation could undermine the effectiveness of the scheme.
Potential for unintended consequences: The complexity of the amendments could create unforeseen issues or unintended consequences, particularly for smaller facilities.
Alternative Approaches: There may be alternative, less complex approaches to achieving emissions reductions that could lessen the administrative burden on businesses.
- Citation, commencement and extent (1) These Regulations may be cited as the Climate Change Agreements (Administration and Eligible Facilities) (Amendment) Regulations 2025 and come into force on 1st January 2026. (2) These Regulations extend to England and Wales, Scotland and Northern Ireland.
These regulations are titled the Climate Change Agreements (Administration and Eligible Facilities) (Amendment) Regulations 2025 and will come into effect on January 1st, 2026.
They apply across the United Kingdom, including England, Wales, Scotland, and Northern Ireland.
- Amendment of the Climate Change Agreements (Administration) Regulations 2012 (1) The Climate Change Agreements (Administration) Regulations 2012 are amended as follows. (2) In regulation 2 (interpretation)— (a) in the definition of “emissions” for “target unit” substitute “facility”; (b) in the definition of “surplus”, at the end insert “in respect of a facility”; (c) in the definition of “target” for “target unit” substitute “facility”; (d) in the definition of “target period”, at the end insert— “(g) 1st January 2026 to 31st December 2026; (h) 1st January 2027 to 31st December 2028; (i) 1st January 2029 to 31st December 2030;”; (e) after the definition of “target period 6” insert— ““target period 7” means the target period from 1st January 2026 to 31st December 2026; “target period 8” means the target period from 1st January 2027 to 31st December 2028; “target period 9” means the target period from 1st January 2029 to 31st December 2030;”; (f) omit the definition of “target unit”. (3) In regulation 4 (the Register)— (a) for paragraph (1) substitute— “(1) The Secretary of State must operate an electronic system for the administration of agreements (“the Register”).”; (b) in paragraph (2), for “administrator” substitute “Secretary of State”; (c) in paragraph (3), in both places it occurs for “administrator” substitute “Secretary of State”; (d) in paragraph (4), after “use the Register are” insert “the administrator,”. (4) In regulation 5 (set up and operation of an account) omit paragraphs (6) and (7). (5) In regulation 6 (security of the Register), in each place it occurs for “administrator” substitute “Secretary of State”. (6) In regulation 9(3)(b) (publication) for “target unit” substitute “facility”. (7) In regulation 12(2) (terms to be included in an underlying agreement relating to the buy-out fee)— (a) in sub-paragraph (a)— (i) in the opening words for “the target unit has failed to meet its targets” substitute “a facility has failed to meet its target”; (ii) in the words after paragraph (ii) for “targets” substitute “the target”; (b) in sub-paragraph (b)(i) for “target unit” substitute “facility”; (c) in sub-paragraph (c)— (i) after paragraph (i) insert— “(ia) where the finding is of a failure to meet a target for target period 7, 8 or 9, A is the number of pounds sterling which is equal to the result of the application of the formula in paragraph (3) in respect of that target period, rounded up or down to the nearest pound;”; (ii) omit the “and” at the end of paragraph (iii); (iii) for paragraph (iv) substitute— “(iv) S, for target periods 5, 6 and 7, is zero;”; (iv) at the end insert— “(v) S, for target period 8, in units of tCO2 equivalent represents any surplus in respect of target period 7; and (vi) S, for target period 9, in units of tCO2 equivalent represents any surplus in respect of target period 7 or 8;”; (d) in sub-paragraph (d)— (i) omit the “and” at the end of paragraph (i); (ii) after paragraph (i) insert— “(ia) where the finding is of a failure to meet a target for target period 7, 8 or 9, A is the number of pounds sterling which is equal to the result of the application of the formula in paragraph (3) in respect of that target period, rounded up or down to the nearest pound; and”; (e) in sub-paragraph (e) for “target unit is found to have failed to meet its targets” substitute “facility is found to have failed to meet its target”. (8) At the end of regulation 12 insert— “(3) The formula in this paragraph is— [(A × B) / (C × D × E)] × 1000 + [(F × G) / (H × E)] × 1000] × 0.5 where— (a) A is the number of pounds sterling which is specified in the Table in paragraph 42(1) of Schedule 6 on the 1st April in the first year of the relevant target period as payable by way of levy— (i) per kilowatt hour; (ii) on a taxable supply of electricity; (b) B is 1, reduced by the percentage which is specified in paragraph 42(1)(ba) of Schedule 6 (reduced-rate supply of electricity) on the 1st April in the first year of the relevant target period; (c) C is the carbon emission factor for electricity of 0.0274; (d) D is the factor for calculating the primary energy associated with a unit of electricity supplied by an electricity utility, which is 2.1; (e) E is the relative molecular mass of carbon dioxide to carbon, which is 44 divided by 12; (f) F is the number of pounds sterling which is specified in the Table in paragraph 42(1) of Schedule 6 on the 1st April in the first year of the relevant target period as payable by way of levy— (i) per kilowatt hour; (ii) on a taxable supply of gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility which is not a reduced-rate supply; (g) G is 1, reduced by the percentage which is specified in paragraph 42(1)(c) of Schedule 6 (reduced-rate supply of gas) on the 1st April in the first year of the relevant target period; (h) H is the carbon emission factor for gas of 0.0497; (i) “carbon emission factor” means the mass of carbon or carbon equivalent emitted in kilograms per kilowatt hour of energy consumed; (j) “primary energy” means energy that has not undergone any conversion or transformation process; (k) “relevant target period” means the target period in respect of which the formula in this paragraph is applied.”. (9) In regulation 12A (terms to be included in an umbrella agreement relating to the buy-out fee)— (a) in paragraph (3)— (i) after paragraph (a) insert— “(aa) where the finding is of a failure to meet a target for target period 7, 8 or 9, A is the number of pounds sterling which is equal to the result of the application of the formula in regulation 12(3) in respect of that target period, rounded up or down to the nearest pound;”; (ii) omit the “and” at the end of paragraph (c); (iii) in paragraph (d) for “and 6,” substitute “6 and 7,”; (iv) after paragraph (d) insert— “(e) S, for target period 8, in units of tCO2 equivalent represents any surplus in respect of target period 7; and (f) S, for target period 9, in units of tCO2 equivalent represents any surplus in respect of target period 7 or 8.”; (b) in paragraph (4)— (i) omit the “and” at the end of paragraph (a); (ii) after paragraph (a) insert— “(aa) where the finding is of a failure to meet a target for target period 7, 8 or 9, A is the number of pounds sterling which is equal to the result of the application of the formula in regulation 12(3) in respect of that target period, rounded up or down to the nearest pound; and”. (10) For regulation 14(2) (terms to be included in underlying agreement relating to the provision of information) substitute— “(2) The terms referred to in paragraph (1) are that the operator must, in respect of each of its facilities— (a) provide to the administrator on or before 1st May following the end of a target period such information as has been requested by the administrator in order to determine whether progress towards meeting the facility’s target is, or is likely to be, taken to be satisfactory; (b) provide to the administrator on or before 1st May 2027 and on or before 1st May in each subsequent year— (i) such information as has been requested by the administrator about the actions taken in relation to energy efficiency improvements or emissions reductions in order to meet the facility’s target; (ii) confirmation that the facility meets the requirements of regulation 3(1)(a) of the Climate Change Agreements (Eligible Facilities) Regulations 2012; and (iii) such information relating to the application of the UK ETS to the facility as has been requested by the administrator in order to assist the Secretary of State in carrying out functions in relation to the scheme set out in paragraphs 44 to 52 of Schedule 6; (c) provide to the administrator on or before 1st May 2028, and on or before 1st May 2030, such information as has been requested by the administrator in order to determine whether progress towards meeting the facility’s target is, or is likely to be, taken to be satisfactory; and (d) provide to the administrator any other information requested at any time by the administrator by the date specified in the request to enable the administrator to determine that— (i) the facility’s target has been met; or (ii) the operator is complying with the terms of the underlying agreement. (3) In paragraph (2)(b)(iii), “UK ETS” means the trading scheme known as the UK Emissions Trading Scheme or UK ETS, established by the Greenhouse Gas Emissions Trading Scheme Order 2020.”. (11) In regulation 15 (penalties)— (a) for paragraph (1) substitute— “(1) The administrator may impose a financial penalty on an operator if the operator, in relation to one or more of its facilities— (a) fails to provide information in accordance with regulation 14(2); (b) provides inaccurate information under regulation 14(2)(a), (b)(i) or (c); (c) provides inaccurate information under regulation 14(2)(b)(iii) or (d); or (d) fails to make any other notification required under the terms of an underlying agreement.”; (b) in paragraph (1ZA), in the opening words after “may be imposed” insert “in relation to a facility”; (c) in paragraph (1A)— (i) in sub-paragraph (a) for “target unit which does not include” substitute “facility which is not”; (ii) in sub-paragraph (b) for “target unit which includes” substitute “facility which is”; (d) in paragraph (2), in both places it occurs for “target unit” substitute “facility”; (e) in paragraph (2A) for “target unit which includes” substitute “facility which is”; (f) in paragraph (2C)— (i) in sub-paragraph (a) for “target unit” substitute “facility”; (ii) in sub-paragraph (b) for “target unit” substitute “facility”; (g) at the end of paragraph (3) insert— “(iv) an amount in pounds sterling per tCO2 equivalent of the difference between the actual emissions and the reported emissions for target period 7, 8 or 9, where that amount is equal to the result of the application of the formula in regulation 12(3) in respect of that target period, rounded up or down to the nearest pound.”; (h) in paragraph (5), in the definition of “base year”— (i) in paragraph (a) for “target unit which includes” substitute “facility which is”; (ii) in the opening words of paragraph (b) for “target unit which does not include” substitute “facility which is not”; (i) in paragraph (5), for the definition of “relevant target period” substitute— ““relevant target period” means— (a) for a penalty imposed for failure to provide information in accordance with regulation 14(2)(a), (b), (c) or (d)(i), the target period in respect of which the request for information was made; (b) for a penalty imposed for providing inaccurate information under regulation 14(2)(b)(iii) or (d)(i), the target period in respect of which the request for information was made; (c) for a penalty imposed for failure to provide information in accordance with, or for providing inaccurate information under, regulation 14(2)(d)(ii), the target period during which the request was made, or if the request was made after the end of all target periods to which the underlying agreement applies, the last target period to which the agreement applies; (d) for a penalty imposed for failure to make any other notification required under the terms of an underlying agreement, the target period during which the notification was required to be made, or if the notification was required to be made after the end of all target periods to which the underlying agreement applies, the last target period to which the agreement applies.”.
This section amends the 2012 Climate Change Agreements (Administration) Regulations.
Many changes replace instances of “target unit” with “facility,” reflecting a shift from group-based to facility-based targets.
New target periods (7, 8, and 9) are added, running from 2026 to 2030.
The Secretary of State's role is clearly defined in managing the register.
Paragraphs (6) and (7) of regulation 5 are removed, and the definition of Target Unit is removed.
Regulations 6, 9, 12, 14 and 15 are all modified to incorporate the changes to reflect the new definitions and responsibilities.
A new formula is added for calculating buy-out fees, detailed in regulation 12, reflecting a weighted average of CCL rates for gas and electricity.
The information requirements for operators are updated in regulation 14, along with associated updates to penalty regulations.
The changes ensure that target periods, emissions reporting, and penalty calculations reflect the facility-based approach.
- Amendment of the Climate Change Agreements (Eligible Facilities) Regulations 2012 (1) The Climate Change Agreements (Eligible Facilities) Regulations 2012 are amended as follows. (2) In regulation 1(3) (expiry) for “2027” substitute “2033”. (3) In regulation 2 (interpretation), at the appropriate place insert— ““biomass” includes biomass in solid, liquid or gaseous form; “non-renewable fuel” means a relevant commodity other than biomass; “renewable fuel” means biomass;”. (4) In regulation 5 (calculation of reckonable energy from relevant commodities and electricity)— (a) at the end of the heading insert “: general case”; (b) in paragraph (2)— (i) omit “Subject to regulations 6 and 7,”; (ii) for “2.6” substitute “2.1”; (c) after paragraph (2) insert— “(3) This regulation does not apply where any of regulations 5A to 7B applies.”. (5) After regulation 5 insert— 5A. Calculation of reckonable energy from self-generated solar, wind or water power (1) The quantity of self-generated electricity is treated as reckonable energy. (2) In paragraph (1) “self-generated electricity” means electricity which— (a) is generated from— (i) the direct conversion of sunlight; (ii) wind; or (iii) water power; and (b) is— (i) generated in plant which is located in, and is intended for supplying electricity for use by, a facility; or (ii) supplied to a facility without passing through a distribution system operated by an electricity utility. (6) For regulation 6 (calculation of reckonable energy from dedicated electricity generation plant) substitute—
- Calculation of reckonable energy from dedicated electricity generation plant (1) This regulation applies to electricity generated in plant which is located in, and intended for supplying electricity for use by, a facility unless regulation 5A, 7, 7A or 7B applies to the electricity. (2) Where the electricity is used on other parts of a site, the electricity generated must be attributed to the facility and the rest of the site on a pro rata basis. (3) Where the electricity is generated from the combustion of exclusively non-renewable fuel, reckonable energy must be calculated by reference to the gross calorific value of the commodity burned to produce the electricity. (4) Where the electricity is generated from the combustion of exclusively renewable fuel, the quantity of electricity must be multiplied by a factor of 2.1 to convert it into reckonable energy. (5) Where the electricity is generated from the combustion of both renewable fuel and non-renewable fuel, reckonable energy must be calculated— (a) in accordance with paragraph (3), in respect of the proportion of the electricity equal to the proportion of relevant commodities burned to generate the electricity which are non-renewable fuel, calculated by reference to the gross calorific value of each commodity; and (b) in accordance with paragraph (4), in respect of the proportion of the electricity equal to the proportion of relevant commodities burned to generate the electricity which are renewable fuel, calculated by reference to the gross calorific value of each commodity. (7) In regulation 7 (calculation of reckonable energy from combined heat and power stations)— (a) at the end of the heading insert “: non-renewable fuel”; (b) in paragraph (1), after “power station” insert “which exclusively burns non-renewable fuel”; (c) for the formula in paragraph (5) substitute— “RHS = [(EC x HP) / (2ET+HT)] - [((HP×ES)/HT) x (2.1 - (2EC / 2ET+HT))]”; (d) For paragraph (6) substitute— “(6) For the purposes of paragraphs (4) and (5), electricity from a combined heat and power station is put into public supply when it— (a) is supplied to an electricity utility; and (b) is CHP qualifying power output. (7) In paragraph (6)(b)— “CHP qualifying power output” has the meaning given by the relevant CHPQA standard; “CHPQA scheme”, in relation to a combined heat and power station, means the scheme in relation to which the station’s CHPQA certificate was issued; “CHPQA standard” means the Combined Heat and Power Quality Assurance Standard, Issue 7, promulgated by the Department for Energy Security and Net Zero, or its predecessor standards; “relevant CHPQA standard”, in relation to a combined heat and power station, means the CHPQA standard which is applicable to the station’s CHPQA scheme.”. (8) After regulation 7 insert— 7A. Calculation of reckonable energy from combined heat and power stations: renewable fuel (1) Reckonable energy from a combined heat and power station which burns relevant commodities consisting exclusively of renewable fuel must be calculated in accordance with this regulation. (2) The quantity of electricity produced by the combined heat and power station must be multiplied by a factor of 2.1 to convert it into reckonable energy, whether or not the electricity is put into public supply within the meaning of regulation 7(6). (3) Subject to paragraph (4), the following formula applies in respect of heat produced by the combined heat and power station— RE = EC - (EP x 2.1) where— RE = reckonable energy from the heat produced by the combined heat and power station; EC = the total energy content of the relevant commodities burned in the combined heat and power station calculated by reference to the gross calorific value of each commodity; EP = the total quantity of electricity produced by the combined heat and power station. (4) When applying the formula in paragraph (3), if EC is less than (EP x 2.1), RE = 0. 7B. Calculation of reckonable energy from combined heat and power stations: renewable and non-renewable fuel The reckonable energy from a combined heat and power station which burns both renewable fuel and non-renewable fuel is calculated— (a) in accordance with regulation 7, in respect of the proportion of the reckonable energy equal to the proportion of relevant commodities burned in the combined heat and power station which are non-renewable fuel, calculated by reference to the gross calorific value of each commodity; and (b) in accordance with regulation 7A, in respect of the proportion of the reckonable energy equal to the proportion of relevant commodities burned in the combined heat and power station which are renewable fuel, calculated by reference to the gross calorific value of each commodity.”.
This section amends the 2012 Climate Change Agreements (Eligible Facilities) Regulations.
The expiry date of the regulations is moved from 2027 to 2033 to reflect the extended duration of the scheme.
New definitions are added for "biomass," "non-renewable fuel," and "renewable fuel." The calculation of reckonable energy is updated; the energy multiplication factor is revised from 2.6 to 2.1 for grid electricity, with exemptions are specified for self-generated renewable electricity.
New regulations 5A, 7A, and 7B are introduced to address the calculation of reckonable energy from self-generated solar, wind or water power and combined heat and power stations using renewable and non-renewable fuels.
This provides a more nuanced approach to calculating reckonable energy, taking into consideration the increasing use of renewable energy sources.
- Transitional provision (1) The amendments made by these Regulations do not apply in relation to a target period ending before 1st January 2026. (2) In this regulation “target period” has the same meaning as in regulation 2 of the Climate Change Agreements (Administration) Regulations 2012.
This is a transitional provision.
The changes made by these regulations do not apply to target periods that ended before January 1st, 2026.
The definition of 'target period' remains consistent with the definition in regulation 2 of the 2012 Climate Change Agreements (Administration) Regulations.