Climate Change Agreements: Review of Buy-out Price

Overview

This consultation was carried out by the Department of Energy and Climate Change. In July 2016, the department merged with the Department for Business and Innovation and Skills to form the Department for Business, Energy and Industrial Strategy.

The Department is seeking views and evidence to inform a decision on whether the buy-out price for the Climate Change Agreements (CCA) scheme should be adjusted for Target Periods 3 and 4.

This consultation contains evidence-gathering questions on the buy-out price. The aim is to gather stakeholder views on whether a change to the buy-out price would increase carbon savings under the CCA scheme, and which of the options outlined by the Department (see link below) would be most appropriate for the buy-out price.

Why your views matter

The Climate Change Agreements (CCA) buy-out price for the first two target periods (2013-14 and 2015-16) was announced in the Government Response to the Consultation on Simplifying the CCA Scheme in January 2012. This stated that the objective in setting the buy-out price was to strike a balance between having a strong incentive to abate (i.e. to introduce measures to meet energy or carbon saving targets) and the financial impact, including any competitiveness issues, on participants. This Response set the buy-out price for TP1 and 2 at £12/tCO2e.

Consistent with the Government’s objective to reduce carbon emissions cost-effectively, we would now like to understand whether a change to the buy-out price would increase carbon savings under the CCA scheme. A higher price would likely provide a sharper financial incentive to meet targets, however it may affect the right balance between an incentive to meet targets and avoiding competitiveness impacts.

What happens next

The Government will consider responses to this consultation and make an announcement in autumn 2016.