Issues tackled in this report
7. Notwithstanding its importance to the UK Climate
Change Programme, the CCL package has from its beginning been
the subject of some controversy. For instance:
- a number of organisations, including the Royal
Society, have criticised the way in which the Levy is charged
on energy use rather than carbon emissions directly; they have
argued that this reduces its impact on carbon emissions, and leads
to some anomalies and perverse outcomes;
Table 1 The CCL and CCA were two of the
top three policies in the 2006 Climate Change Programme
Sources: Climate Change: The UK Programme 2006, Defra,
March 2006; NAO, The Climate Change Levy and Climate Change Agreements,
August 2007
- environmental groups have argued
that the terms of the Levy have been too weak, not least because
the rates at which it was charged remained frozen for the first
six years—meaning that in March 2007 Levy rates were around
15% lower in real terms than when originally introduced;[8]
- business groups have complained that there is
a profusion of different policies targeting the business sector,
and that this can lead to excessive administrative burden, especially
where the same firm is subject to multiple regimes;
- concerns have also been raised about whether
the targets and auditing arrangements of the Climate Change Agreements
are sufficiently stringent, and thus the extent to which the CCAs
offer value for money.
8. The Environmental Audit Committee has monitored
the development and impacts of the Climate Change Levy package,
and the criticisms made of it, since it was first proposed in
1999; but this is the first report we have devoted entirely to
it. In 2006 we summed up the views expressed over a number of
Committee reports:
EAC has in the past expressed concerns about
the Climate Change Levy and its associated negotiated agreements—in
particular, the failure to increase the rates of the Levy since
its introduction and the size of the savings which the Government
claims have been achieved through Climate Change Agreements.
The evaluation conducted
by Cambridge Econometrics and published a year ago suggested that
the Levy was not having a significant impact on industry. It concluded
that energy efficiency improvements within industry might well
have occurred in the absence of the Levy, as a result of technological
change and the relative decline of UK energy-intensive sectors;
and that, if the Levy had had an effect, it was likely that this
was simply due to its announcement rather than to the ongoing
impact of Levy rates. The
recent Budget has at least increased the rates, though it remains
to be seen whether the scale of the increase will have any significant
impact.[9]
9. In July 2006 we asked the National Audit Office
(NAO) to carry out a study into the effectiveness of the CCL and
CCAs. In August 2007, following publication of the third set of
biennial results from the Climate Change Agreements, the NAO published
its report (Box 2). This found that both the CCL and CCA
had driven genuine carbon reductions; but that the impact of the
Levy was now harder to discern, and that CCAs were now forecast
to achieve less than formerly projected.
10. Drawing on the work of the NAO, plus the evidence
we received from a variety of sources, in this report we attempt
conclusively to address these issues. The overarching questions
we examine in this report are:
- How effective has the CCL package been in reducing
carbon emissions?
- What have been the economic impacts of the CCL
package on UK business?
- Should the CCL package be reformed, and in what
ways?
- What are the wider lessons
to be learned from this policy: both about reducing emissions
from the business sector, and about climate change policy more
generally?
1 
