1. INTRODUCTION

These Guidance Notes are intended to help fish processing companies become Participants in the UK Fish Processing Industry Climate Change Levy Discount Scheme. This Scheme will enable eligible fish processing plants to obtain an 80% discount on the recently introduced Climate Change Levy (CCL).

The main body of these Guidance Notes summarises key aspects of the Fish Industry Climate Change Levy Discount Scheme. More detailed advice is given in a set of Information Sheets included in this Pack. If you require further details about any aspect of the Discount Scheme contact the Scheme Administrators, Enviros, via:

2. WHAT IS THE CLIMATE CHANGE LEVY?

The Climate Change Levy is a tax on the business use of energy. It has been introduced by the UK Government to reduce emissions of greenhouse gases. These gases - of which carbon dioxide (CO2) is by far the most significant - are believed to be having a damaging effect on our climate.

The Climate Change Levy has been charged on energy delivered to industrial and commercial energy users since April 1st 2001. It is charged on electricity, gas, coal and LPG¹ and is collected by your energy suppliers. The impact of the Climate Change Levy on your energy costs depends on your current fuel mix and energy tariff. A good rule of thumb is that the Levy will add about 20% to gas costs and 10% to electricity costs. Oil is not subject to the Climate Change Levy. Information Sheet 1 gives further details about the Levy.

¹Liquefied Petroleum Gas

3. WILL I HAVE TO PAY THE FULL CLIMATE CHANGE LEVY?

The Climate Change Levy will apply to most industrial and commercial use of energy. The Levy is not applied to energy used in the domestic sector or in transport. 100% exemptions are allowed for some business uses of energy but these will rarely apply to fish processing plants - Information Sheet 1 has more details.

4. CAN I CLAIM THE 80% CCL DISCOUNT?

The Government is offering the 80% Climate Change Levy discount to "energy intensive users". Rules governing eligibility to participate in a CCA and gain the Levy discount are complex - details on eligibility are given in Information Sheet 2.

²The act of processing is important in the definition of eligibility - sites that only
store or sell fish products are NOT eligible for a Levy discount.

On behalf of the industry, the Grimsby Fish Merchants Association and the Scottish Fish Merchants Federation have set up a fish industry CCA with Government (DEFRA is the Department responsible). The Scheme is being administered by Enviros.

If your company is involved in fish processing and you wish to obtain an 80% Levy discount you should complete the Application Form included in this Information Pack. Your Application Form will be processed by Enviros and a contract between your company and the Government prepared. When this contract has been signed you will be able to claim your Levy discount.

After a site has established a CCA you will need to contact your energy suppliers to inform them that you can claim a Levy discount. Your energy suppliers will then make adjustments to your billing to give you the Levy discount. The full Climate Change Levy and your discount will be itemised separately on your fuel invoice.

The discount you get will normally be 80%. However, it could be less than 80% if some of your energy is used in a part of your site that is not eligible. You will need to establish your rate of discount and declare this to your energy suppliers who will adjust the Levy rate as appropriate. The Scheme Administrators can help with this process if required.

5. HOW IS THE FISH INDUSTRY AGREEMENT STRUCTURED?

The Fish Industry CCA involves three types of contract:

The Umbrella Agreement, between the fish industry and DEFRA. It includes the general terms and conditions that must be met by the CCA. The Umbrella Agreement will include an overall target and milestones for the whole of the Agreement. It will be signed on behalf of the industry by the Grimsby Fish Merchants Association and the Scottish Fish Merchants Federation.

The Underlying Agreement, between an individual Participant and DEFRA. It reflects the terms of the Umbrella Agreement and includes site specific targets and milestones.

The Administrative Agreement, between an individual Participant and Fish Industry Discount Scheme. It specifies the responsibilities of both the Participant and Discount Scheme in terms of data reporting and the administration of the Agreement.

Further details about the three contracts are given in Information Sheet 5. Enviros will draw up contracts on your behalf after processing your Application Form.

6. HOW WILL MY EFFICIENCY TARGET BE SET?

If you sign a CCA you will be set an energy saving target that must be achieved by the end of 2010. The level of the target varies between industry sectors and has been set through negotiations between the Government (DEFRA) and sector Trade Associations.

The targets are based on improvements that are thought to be achievable and cost effective.

The actual targets negotiated for the Fish Industry sub-sectors range are 5% for primary fish processing and 10% for secondary fish processing.

Your progress towards the overall target for 2010 is measured at 2-yearly intervals with clearly defined quantitative milestones. The 80% discount is offered for 2 year periods in advance. When you achieve a milestone target DEFRA will re-certify your discount for the following two years. Information Sheet 3 includes details of how milestones will be set.

7. WHAT HAPPENS IF I FAIL TO MEET A MILESTONE TARGET?

An individual site will continue to get the Climate Change Levy discount by achieving the milestone targets specified in the Underlying Agreement. If you fail to achieve a milestone target you might loose your 80% discount for the next 2 year period. In these circumstances you can still remain part of the CCA and would be re-certified for your discount at the following milestone if you have "caught up" with the milestone profile.

There are a number of ways in which you can avoid losing your discount even if you fail to meet the quantitative milestone target:

• An important opportunity is emissions trading - you may be able to purchase CO2 emission reduction "credits" that have been achieved by another company. See Information Sheet 9.
  
  
• At each milestone an aggregate Fish Industry target for all Participants will be assessed. If this target is met, then ALL Participants will be deemed to have met their target. Only if the Fish Industry sector target is missed will DEFRA identify the individual Participants that have failed to meet their target. However since any facility which over-achieves is likely to sell its emission reductions, it is unwise to rely on other companies to over-achieve on your behalf.
  
  
• For the first 2 milestones (i.e. the first 5 years of the Agreement) DEFRA have proposed certain risk management options that will be considered if you have missed your target. These measures are based on adjustments for changes in product mix and product output. They are described in Information Sheet 8. To be allowed to use the risk management measures you will need to show that you are making "best endeavours" to achieve your target. This will be judged by your implementation of a number of "common sense" initiatives called the Qualitative Requirements. These are described in Information Sheet 7.
  

8. WHAT HAPPENS IF I EXCEED MY MILESTONE TARGET?

There are 3 potential benefits if you beat your milestone target:

• you will make cost savings for the reduced level of energy purchases;
  
  
• you will make an extra improvement to your environmental impact and,
  
  
• you can benefit financially from your good progress through Emissions Trading. This is a mechanism that allows reductions in emissions to be transferred from one site to another, rather than requiring each facility to make the same reduction. Thus if a site exceeds one of its milestone targets it may be possible to sell the benefits of the extra CO2 reduction to a site that has failed to meet its target.

Further details about emissions trading are in Information Sheet 9.

9. IS CHP INCLUDED IN MY TARGET?

Combined Heat and Power (CHP) involves on-site generation of electricity and use of the available heat. With current energy prices CHP is unlikely to be cost effective in the fish processing industry. However, DEFRA will expect you to review CHP opportunities using a simple procedure described in Information Sheet 11.

10. HOW DO I DECIDE IF I SHOULD JOIN THE DISCOUNT SCHEME?

The CCAs have been designed to encourage firms to participate and receive the discount. By joining an Agreement you get two benefits:

• The 80% Levy discount, AND
  
  
• The savings from improved energy efficiency. The energy efficiency targets should not impose any net additional costs, as they are set at a level that should be cost effective for the majority of participants.

Against these benefits, there are no downside risks and only a small annual administration cost (see Information Sheet 10). The Underlying Agreements between companies and the DETR and Umbrella Agreement between the Fish Industry and the DETR are voluntary in nature. This means they do not give rise to normal contractual legal obligations. If you wish to withdraw from the Agreement, you will incur no penalty other than forfeiting the future value of the Levy discount. You will not need to repay any discount already received.

If you join the Discount Scheme at the start (Summer 2002), you will automatically receive the Levy discount until March 2005. You will receive this discount under all circumstances, irrespective of your performance measured against the first milestone target in 2005. It is not repayable. If you fail to meet the first milestone target, you will lose your Levy discount until the next milestone date.

In the vast majority of cases, the Levy discount will far outweigh the cost of participation. In addition to the Levy discount you will accrue cost effective energy efficiency savings. Also of importance, you will be helping mitigate the impact of global warming - the environmental image of your company should benefit from this. We encourage all companies to consider the benefits of the Discount Scheme very carefully. Information Sheet 10 provides sample calculations of costs and benefits for different sized sites.

11. HOW DO I REGISTER WITH THE DISCOUNT SCHEME?

In order to register for a Climate Change Levy discount you must undertake the following steps:

1. Return the Application Form to the Scheme Administrator as soon as possible.
2. Your data will be checked for eligibility, completeness and accuracy.
3. Assuming the site is eligible for a discount, you will be issued with a customised Underlying Agreement, showing the targets and milestones. This must be signed and returned to the Scheme Administrator.
4. The contract will then be countersigned by DEFRA and your facility will be included in the list of facilities certified for a Climate Change Levy discount. You will then be issued with forms to send to your energy suppliers to claim the discount.

12. WHAT IS REQUIRED ON THE APPLICATION FORM?

An Application Form must be filled in for each site joining the Scheme. The completed form will provide data that:

• will be used to establish eligibility for a discount
  
  
• defines your Base Year energy and production data.

Detailed explanatory notes about questions in the Application Form are incorporated in the Form, which is included in this Information Pack. Further details about reporting requirements are in Information Sheet 6.

13. WHAT HAPPENS AFTER I HAVE REGISTERED?

After you have successfully registered with the Climate Change Levy Discount Scheme and obtained your Underlying Agreement, you will be entitled to your 80% Levy discount for the first two years of the CCA. This entitlement will be renewed every 2 years, providing you meet your milestone targets.

You will need to provide the Scheme Administrator with an annual data return showing energy consumption and production data. The annual data return will be based upon a "Climate Change Levy Reporting Year", which will be from October 1st to September 30th. The Scheme Administrator will send you an annual request for data in mid-September.

The first milestone target will be based upon your performance in Reporting Year October 1st 2003 to September 30th 2004. The Scheme Administrator will report consolidated data (including all emission trading transactions) to DEFRA on January 31st 2005. Similar timings will apply in each of the subsequent milestone years (See Information Sheet 3 for a list of milestone dates).

14. ARE THE TERMS FIXED FOR THE LIFE OF THE AGREEMENT?

No, there are opportunities for renegotiation of terms in April 2005 and April 2009.

15. HOW IS MY DATA VERIFIED?

Your data will be returned to the Scheme Administrator on a "self assessment" basis. This means you are responsible for the accuracy of all the data on your Application Form and your Annual Data Returns. The Scheme Administrator will carry out a number of simple checks to verify the accuracy of the data, but cannot be held responsible for any mistakes.

DEFRA will carry out a number of random checks on the data. This will be in the form of a detailed audit of site data by an external auditor. Hence any data you submit in your initial Application Form and for annual data returns must be "auditable".

16. IS MY DATA BEING TREATED IN CONFIDENCE?

The Scheme Administrator is setting up rigorous procedures to ensure that all your data is treated in the strictest confidence. It will only be used for reporting to DEFRA and for "anonymous" benchmark reporting back to industry. No commercially confidential energy or production data will be used for any other purposes.

17. HOW DO I ENSURE MY TARGETS ARE ACHIEVED?

You will need to set up an energy efficiency programme at each site. Enviros can provide advice about this process. Also, the Government's Energy Efficiency Best Practice Programme can provide a wide range of helpful support and literature.

DEFRA has developed a set of "Qualitative Requirements" that define some of the key elements of a well structured energy efficiency initiative. Information Sheet 14 provides further information about energy efficiency programmes and Information Sheet 7 describes the Qualitative Requirements.

18. WHAT WILL IT COST TO JOIN THE DISCOUNT SCHEME?

The administration costs of setting up and operating the Discount Scheme will be recovered by fees that apply on a "per site" basis. Costs comprise two elements: a joining fee and an annual subscription. The joining fee will be charged to cover the set up costs of each facility. This will be invoiced after your application form is processed. The annual fee will be charged each time that annual data collection takes place.

The fee structure splits facilities into 3 size bands. There is also a different level of fees for non-members of relevant Trade Associations. Details of the charging structures are given in Information Sheet 10.

Glossary of Terms