Climate change levy: extension of eligibility criteria for agreements

 

Climate change levy: extension of eligibility criteria for climate change agreements to include the manufacture of certain plastic products and the provision of industrial laundering services

State aid reference number [to be allocated by the EU Commission]

1. Member State

United Kingdom

2. Region

All of the United Kingdom

3. Title of aid scheme

Climate change levy: extension of eligibility criteria for climate change agreements to include the manufacture of certain plastic products and the provision of industrial laundering services.

4. Government or statutory bodies authorised to implement the scheme

HM Revenue & Customs.

5. UK legal basis

Finance Act 2000, Schedule 6, paragraphs 42 to 52, as amended by Finance Act 2009.

The Climate Change Agreements (Eligible Facilities) Regulations 2001
The Climate Change Agreements (Energy-intensive Installations) Regulations 2006

as amended by The Climate Change Agreements (Miscellaneous Amendments) Regulations 2006
The Climate Change Agreements (Eligible Facilities) Regulations 2006

as amended by The Climate Change Agreements (Eligible Facilities) (Amendment) Regulations 2006 and The Climate Change Agreements (Eligible Facilities) (Amendment) Regulations 2009.

6. EC legal basis

Article 1 of Council Directive 2003/96/EC 'restructuring the Community framework for the taxation of energy products and electricity' requires Member States to tax energy products and electricity. The climate change levy is one of the means by which the UK fulfils that obligation.

Article 17 of the Directive permits Member States to apply tax reductions to the supply of energy products and electricity for use by energy intensive businesses.

Commission Regulation 800/2008 of 6 August 2008 (the General Block Exemption Regulation) declares aid compatible with the common market within the meaning of Article 87(3) of the EC Treaty and exempt from the notification requirement of Article 88(3) of the Treaty where:

  • the environmental aid scheme fulfils the conditions of Directive 2003/96/EC
  • the beneficiaries of the tax reduction pay at least the Community minimum tax level set by the Directive
  • the aid is granted for no more than ten years.

This aid scheme meets all of these conditions.

Summary information about the aid scheme has been registered with the Commission under reference xx/xx.

7. Exclusions

None.

8. Duration

This aid is granted until 31 March 2011, to ensure consistency of treatment with other climate change agreements sectors.

9. Objectives of the scheme

Participation in the climate change agreements scheme entitles eligible energy intensive facilities to claim an 80 per cent reduction from the climate change levy in return for meeting challenging targets for improving energy efficiency or reducing emissions. Currently there are 52 sectors with climate change agreements.

Climate change agreements were originally introduced, following State aid approval, alongside the climate change levy in April 2001. Eligibility was based on energy intensive users operating a Part A process listed in Schedule 1 to the Pollution, Prevention and Control (England and Wales) Regulations 2000. In 2001 the UK secured State aid approval for the scheme and all the sectors performing processes listed in those regulations. In accordance with Article 88(3) of the EC Treaty, the UK notified the Commission of its proposal to allow further sectors of industry to enter climate change agreements on 13 July 2004 (later withdrawn and re-submitted on 18 April 2005). Under the extended scheme notified in April 2005, eligibility was extended to specific energy intensity criteria which sectors need to demonstrate that they meet. The Commission approved the general principles for extending the scheme in its decision of 5 October 2005 (N/190/A/2005), and also approved the energy efficiency targets agreed between the UK Government and four sectors. Targets for further sectors were approved in the Commission's decisions of 27 January 2006 (N/190/B/2005), 12 April 2006 (N/95/2006) and 18 September 2006 (N/519/2006).

Eligibility to enter the climate change agreements scheme is being extended to two further sectors, under the energy intensity criteria, to enhance environmental effectiveness and remove competitive distortions.

10. Mechanism for granting aid under the scheme

In order to receive the tax reduction, facilities within the two further sectors must sign and comply with climate change agreements which set out targets for reductions in energy use and/or emissions. Targets are agreed between the Department of Energy and Climate Change (DECC) and the sector associations. The sector associations are responsible for allocating those targets to individual facilities within the sectors and the allocated target is identified in the agreements with the individual facilities.

Regulations made by DECC (see section 14) specify the processes to which eligibility is being extended.

11. Scope of the scheme

This aid scheme will be open to all manufacturers of certain plastic products and providers of industrial laundering services within the sectors represented respectively by the British Plastics Federation and the Textile Services Association which are located in the UK and which enter into a climate change agreement.

12. Budget of aid

The revenue forgone by bringing these two further sectors into the climate change agreements scheme is approximately £5.5 million.

13. Form of aid

The aid will take the form of reductions in environmental taxes: facilities in these two sectors will be entitled to claim 80 per cent relief from climate change levy on supplies of electricity and liquefied petroleum gas if they enter into a climate change agreement. However, facilities in these sectors will have no entitlement to claim the 80 per cent relief on supplies of gas and solid fuel. This limited entitlement to the tax reduction ensures that beneficiaries will pay at least the Community minimum tax level set by Directive 2003/96/EC, thus ensuring that the aid scheme fully complies with Article 25.2 of Commission Regulation 800/2008.

14. Eligible activities to be supported under the scheme

This change affects businesses which:

i) manufacture certain products from plastic materials; or

ii) provide industrial laundering services

using processes specified in The Climate Change Agreements (Eligible Facilities) (Amendment) Regulations 2009, namely:

i) The manufacture of certain products from plastic materials covers processes carried out at an installation or site where plastics materials or plastic products (whether or not these are finished products) are produced by –

(a) the application of heat and pressure to: or

(b) a chemical reaction involving,

plastics powder, granules, shredded waste or liquid: injection moulding, reaction injection moulding, compression moulding (including hot and cold press moulding), transfer moulding, structural foam moulding, direct screw transfer moulding, rotational moulding (including slush moulding), flexible foam moulding (including dual component processing), blow moulding, casting, expanded polystyrene moulding, expandable materials processing, mixing and compounding, calendering, powder coating (including dip moulding), sintering, thermoforming (including vacuum forming), pultrusion, filament winding, spread coating, hand laying-up and resin transfer moulding.

ii) The provision of industrial laundering services covers processes carried out at an installation or site, not being a launderette predominantly offering self-service washes or predominantly serving the domestic market, where textiles are laundered by washing with water, drying and smoothing save where such laundering is carried out in support of other activities carried out by the business (not being textile rental activities), whether or not such activities are carried out at the installation or site.

15. Monitoring and reporting requirements

An annual report on the expenditure under this scheme will be provided to the Commission.

Records will be kept for ten years from the date of the last award of aid under the scheme. If the Commission requests information necessary for it to assess whether the aid conditions have been complied with then HM Revenue & Customs will provide it within the agreed time period.

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