The Climate Change Agreements (Administration, Energy-intensive Installations and Eligible Facilities) (Amendment and Revocation) Regulations 2026

The Climate Change Agreements (Administration, Energy-intensive Installations and Eligible Facilities) (Amendment and Revocation) Regulations 2026 mark a significant evolution, rather than an abolition, of the UK's Climate Change Agreements (CCA) scheme. These Regulations, coming into force on 1 January 2027, consolidate and clarify the administrative and eligibility criteria for the CCA scheme, which offers energy-intensive businesses a reduced rate of Climate Change Levy in exchange for meeting energy efficiency or carbon reduction targets. Crucially, they revoke and remake the 2006 Energy-Intensive Installations Regulations, amend the 2012 Administration and Eligible Facilities Regulations, and expand the scheme's scope to include new energy-intensive processes. This legislative update underpins the new six-year CCA scheme (CCA3), which will run until 2030, with reduced Climate Change Levy rates available until March 2033, ensuring continued incentives for industrial decarbonisation.

The landscape of industrial decarbonisation in the United Kingdom is continually shaped by evolving legislative frameworks designed to balance environmental commitments with economic competitiveness. A pivotal development in this regard is the enactment of The Climate Change Agreements (Administration, Energy-intensive Installations and Eligible Facilities) (Amendment and Revocation) Regulations 2026 (the "2026 Regulations"). These Regulations, laid before Parliament on 20 April 2026 and set to come into force on 1 January 2027, are not a termination of the long-standing Climate Change Agreements (CCA) scheme, but rather a comprehensive overhaul and expansion.

These 2026 Regulations are instrumental in ushering in a new phase of the CCA scheme, known as CCA3, which is designed to run for six years, with target periods extending to the end of 2030 and associated Climate Change Levy (CCL) reduced rates available until March 2033. For legal professionals advising energy-intensive industries, understanding the nuances of these amendments and revocations is critical. The Regulations consolidate existing provisions, clarify eligibility, and introduce new sectors, thereby redefining the parameters within which businesses can secure significant tax relief in exchange for verifiable environmental performance.

The Climate Change Agreements (CCA) scheme has been a cornerstone of the UK's industrial decarbonisation strategy since its inception in 2001, following the introduction of the Climate Change Levy (CCL). The scheme operates as a voluntary agreement between eligible UK industry sectors and the government, administered by the Environment Agency. Participants commit to achieving agreed energy efficiency or carbon reduction targets and, in return, benefit from a substantial discount on the CCL, a tax applied to energy supplied to non-domestic users.

Initially, the CCA scheme was structured around various statutory instruments, including the Climate Change Agreements (Energy-Intensive Installations) Regulations 2006 (S.I. 2006/59), the Climate Change Agreements (Administration) Regulations 2012 (S.I. 2012/1976), and the Climate Change Agreements (Eligible Facilities) Regulations 2012 (S.I. 2012/2999). The scheme has undergone several extensions and modifications, with the most recent extension in 2023 pushing the availability of reduced CCL rates for the then-current scheme until 31 March 2027. This continuous evolution reflects the government's ongoing commitment to supporting energy-intensive industries in their decarbonisation efforts, while also addressing concerns about international competitiveness and carbon leakage, particularly in the context of the UK Emissions Trading Scheme (UK ETS) and other carbon pricing mechanisms.

The 2026 Regulations represent a significant legislative update, primarily by revoking and remaking the Climate Change Agreements (Energy-Intensive Installations) Regulations 2006. This action is not a dismantling of the scheme but a modernisation and consolidation of the framework governing energy-intensive installations. Concurrently, the Regulations amend the Climate Change Agreements (Eligible Facilities) Regulations 2012 and the Climate Change Agreements (Administration) Regulations 2012, streamlining and clarifying the criteria for eligibility and the administrative processes involved in the CCA scheme.

A key aspect of the 2026 Regulations is the expansion of the scheme's scope to include three new energy-intensive processes: the production of automotive grade battery cells, the packaging of spirits, and the mechanical recycling of plastics. This expansion, effective from 1 January 2027, follows a government consultation and demonstrates an adaptive approach to supporting emerging and evolving energy-intensive sectors in their decarbonisation journeys. For businesses operating within these newly eligible sectors, this presents a fresh opportunity to access the significant CCL discounts offered by the scheme.

Furthermore, the 2026 Regulations lay the groundwork for the new six-year CCA scheme (CCA3), which will feature target periods from 1 January 2026 to 31 December 2030, with CCL reduced rates extending until 31 March 2033. A notable change within CCA3, facilitated by these Regulations, is the shift from 'bubbled' agreements covering multiple facilities to targets set at the individual facility level. This aims to simplify rules and provide a more direct incentive for energy efficiency and decarbonisation measures at each site. The Regulations also introduce updated eligibility criteria and revised reporting requirements, necessitating a careful review by existing and prospective participants.

The timing of these Regulations aligns with broader shifts in the UK's climate policy, including the ongoing evolution of the UK ETS and the planned introduction of the UK Carbon Border Adjustment Mechanism (CBAM) in 2027. While the CCA scheme focuses on direct energy efficiency and emissions reductions at the facility level, it complements the carbon pricing signals of the UK ETS and the indirect cost compensation provided by the Energy Intensive Industries Compensation Scheme. The 2026 Regulations, by refining the CCA framework, contribute to a more coherent and robust policy landscape for industrial decarbonisation, ensuring that the UK continues to incentivise emissions reductions across its most energy-intensive sectors.

The Climate Change Agreements (Administration, Energy-intensive Installations and Eligible Facilities) (Amendment and Revocation) Regulations 2026 are a critical piece of legislation for UK energy-intensive industries. Far from signalling the end of the CCA scheme, they represent a significant re-engineering and extension, providing a clear framework for the next phase of industrial decarbonisation incentives. Practitioners must advise clients on the updated eligibility criteria, the new facility-level target setting approach, and the revised reporting requirements that come into effect from 1 January 2027.

Businesses currently participating in CCAs, or those in the newly eligible sectors (automotive grade battery cells, spirits packaging, and plastics recycling), should proactively assess their compliance strategies and engage with the Environment Agency to ensure they meet the new scheme's obligations. The continuation of significant CCL discounts until March 2033 underscores the enduring value of the CCA scheme as a mechanism for both environmental stewardship and cost management. Staying abreast of these regulatory changes is paramount for maintaining compliance and maximising the financial benefits available under the UK's evolving climate change policy framework.