Environment Law Update: Energy 4

United Kingdom

Climate change levy

The Climate Change Levy (Registration and Miscellaneous Provisions) Regulations 2001 (SI 2001 No7) came into force on 29 January. Under the Regulations, companies that carry out activities that make them liable for Climate Change Levy (CCL), had to notify Customs and Excise within 30 days, using Form CCL1. Companies can form CCL groups which then account for the levy on a joint return made by the group's representative. A breach of the provisions can lead to a penalty under the Regulations or under the Finance Act 2000.
(SO, January 2001)

The Climate Change Levy (General) Regulations 2001 (SI 2001 No 838) make further provision for CCL following the Climate Change Levy (Registration and Miscellaneous Provisions) Regulations 2001. They introduced the CCL on 1 April 2001 and make provision for payment by traders in accordance with allocated accounting periods and require record-keeping for up to six years. There is also a mechanism for establishing and adjusting the amount of CCL paid or due and for the administration of CCL exclusions, exemptions and reduced rates. Both customers and suppliers must provide Customs with relevant data. Customers must certify entitlement as necessary and calculate the proportional reduction in the CCL due. Suppliers can then act on this information to calculate the appropriate reduction in the CCL that they must pay to Customs.
(SO, 9 March 2001)

Businesses which are exempt from the CCL, or which pay a reduced rate, were required to get the necessary certificates to their energy supplier before the beginning of April. Customs and Excise also required copies of all certificates, before the levy came into force on 1 April. Certificates may be submitted after this date but payments will not be retrospective. The CCL is charged on supplies of fuel for lighting, heating and power to industrial and commercial users and the public sector but not on supplies for domestic use or non-fuel uses such as for feedstock. Other exemptions include uses of energy for some forms of transport, electricity from renewable sources and energy produced for consumption outside the UK. In addition, the CCL is not applicable to gas, liquid petroleum gas, coal, coke and in some cases electricity, used in combined heat and power stations which re-use the heat to produce more power. Mineral oils (diesel, red diesel, petrol, paraffin), household refuse, waste paper, sewage gas, landfill gas and chicken droppings are not taxable. The levy rate depends on the type of fuel involved and covers the following : electricity (0.43p per KW/h); gas (0.15 p per KW /h); liquid petroleum gas (0.96p per kilogram); coal, coke and similar (1.17 p per kilogram).
(HM Customs and Excise, Business Brief No 4/2001, 2 March 2001)

Leading industry groups are claiming that the CCL will harm manufacturing competitiveness while doing little to reduce carbon dioxide emissions. The tax gives 80 per cent rebates for certain sectors that sign voluntary agreements with the Government to improve energy efficiency and cut greenhouse gas emissions. However, it only applies to energy intensive industries such as steel, cement and some chemical industries. Research commissioned by the Engineering Employers Federation has suggested that the CCL will cost industries excluded from agreements almost GBP 100m and will affect 2,300 firms employing more than 1.3 million workers. This is even after accounting for a the 0.3 per cent cut in employers' national insurance contributions. The Confederation of British Industry (CBI) is backing calls for more firms to be eligible for energy efficiency agreements with the Government.
(The Times, 18 January 2001)

A questionnaire for generators who produce electricity from renewable sources was available from Ofgem. The questionnaire had to be filled in by all generators wishing to apply for their output to qualify for an exemption from the CCL. The questionnaires were used by Ofgem to assess whether the electricity generators would meet the exemption criteria set by HM Customs & Excise. Accredited generators were issued with Levy Exemption Certificates (LECs) for their monthly qualifying output. Electricity suppliers who buy the output will not have to pay Levy on that electricity. The supplier can pass this saving on to their non-domestic customers who have signed green contracts. In order to qualify for accreditation from 1 April 2001, Ofgem had to receive the completed form by 16 February.
(Ofgem News Release, 30 January 2001)

The European Commission has approved almost all the exemptions from the CCL and not raised objections under the EU State aid rules. However, the use of dual fuels, where energy is used partly for fuel purposes and partly for non-fuel purposes, will be investigated further by the Commission. Such fuels are used by the metallurgical industry, so the steel and aluminium sectors, and any others which use dual fuel will not be allowed this exemption on 1 April.
(European Commission Press Release, 28 March 2001)

Carbon Trust

The chairman and managing director of Ford Motor Company, Ian McAllister, has been appointed chairman of the Carbon Trust. The Carbon Trust is aimed at helping business invest in energy efficient and low carbon technologies and practices as part of the UK's climate change programme. The Trust will involve the Government, businesses, NGOs and researchers working together across the UK to offer an integrated programme of incentives. It will be funded largely by the proceeds of the climate change levy, with up to GBP 200m made available over the next 2 years to help businesses invest in low carbon technologies. In addition, there will be GBP 17 million from the existing DETR Energy Efficiency Best Practice Programme and a new Enhanced Capital Allowance scheme to come into effect from 1 April 2001 with GBP 70 million of funding in the first year.
(DETR News Release, 20 March 2001 )

Building regulations

The DETR is proposing to amend Part L of the Building Regulation to improve energy efficiency of new buildings in an attempt to reduce carbon dioxide emissions. There was a consultation exercise on this issue in June 2000, after which the Building Regulations Advisory Committee (BRAC) recommended amending the proposals in light of the responses received. The proposed draft is now awaiting responses to another consultation paper on Part E of the Regulations, dealing with sound insulation, in which views are also being sought on Part L due to its interaction with Part E. The consultation closes on 20 April, shortly after which the DETR intends to publish draft Regulations. Under the Directive laying down a procedure for the provision of information (83/189/EEC), the EU has to be notified of proposed technical amendments to the Building Regulations. Amendments cannot be issued until after a response has been received. The EU has been notified and there is presently a three months standstill period, ending 2 May 2001. If member states make any comments during this standstill period, it will be extended to 2 August 2001.
(DETR New Release, 5 March 2001)

Wind power

Renewable Energy Systems Ltd (RES), the largest UK-based wind energy developer, has said that UK planning constraints on developing land-based wind farms was forcing it to seek more work overseas. In one major project it has been seeking approval for six years. Another company, M & N Wind Power, one of the world's largest developers of wind power, has just opened its first British project. This was delayed by a public enquiry and took about five years to develop. At present, Britain's wind generation capacity is 400MW compared with 6000MW in Germany. It is estimated that an extra 6000MW of wind power will be necessary if the Government is to meet its Renewable Energy Obligation target of generating 10per cent of the UK's energy from renewable sources by 2010. A GBP 100 million Government aid programme has recently been announced for renewable energy projects, much of which will go towards supporting wind power.
(The Financial Times, 14 and 27 March 2001)

The first significant investment in an offshore wind project since Blyth, has been announced by Enron Corp. The project, situated 8 kilometres offshore from Harwich, would eventually supply 30MW of power. However, any future development of the site is subject to permitting and acquisition of land rights. The permitting process for offshore wind farms is complex and is currently the subject of a DTI consultation paper (see Section 10).
(Power UK, January 2001)

Nuclear power company British Energy Plc has announced it is teaming up with RES to develop offshore wind power around the UK. The new company, Offshore Wind Power Ltd, has made an application to the Crown Estate for a lease for its first project, the first stage in a process which could last up to four years.
(Reuters News Service, 16 February 2001)

Energy efficiency

The DETR has issued proposals for Regulations to implement a Directive on energy efficiency for lighting ballasts (2000/55/EC). The proposed Energy Efficiency (Ballasts for Fluorescent Lighting) Regulations would require suppliers to produce ballasts, the device which controls the current passing through the tube, to comply with minimum performance standards and would result in the least efficient ballasts being taken off the market. Comments on the proposed Regulations should reach DETR no later than 25 May 2001.
(DETR, 20 February 2001)

European Union

Renewable energy

A European Commission policy review has concluded that the EU will not achieve its target of doubling the share of energy produced from renewable sources. It states that large increases in sectors such as wind power have been offset by rising energy demand. The review follows a 1997 white paper which recommended achieving a target of 12per cent of total energy generation from renewables by 2010. The latest report is calling for strong implementation of management and energy efficiency measures taken under the action plan so far. The Commission is urging the 15 EU member states to develop their own objectives to maintain the strategy's momentum.
(COM(2001) 69, 16 February 2001)