Introduction
Eligibility for a CCLA depends on two main considerations:
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Whether the site has processes that could be covered by the Integrated Pollution Prevention and Control (IPPC) Directive. Only such sites are permitted to join CCLAs and claim the 80% discount.
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What proportion of the energy used at an eligible site is used directly in an IPPC process or a process that is "technically linked" to such a process. Energy used in non-IPPC activities might not be eligible for the 80% discount.
It is very important to note that the size thresholds used to define IPPC processes are NOT considered in relation to CCLA eligibility. For example, in the metal packaging sector a plant must use in excess of 200 tonnes per year of organic solvent to require an IPPC licence. A site using, say, 10 tonnes per year will clearly not require an IPPC licence. However, this small site WILL be eligible for a Climate Change Levy discount.
Eligible Activities
The IPPC Directive is a new pan-European regulatory regime for the more polluting industrial processes. To a large extent it mirrors the UK’s own legislation in this area, Integrated Pollution Control (IPC) which has been in place since 1990. The new IPPC Directive includes a section on coating activities and surface treatments using organic solvents. This makes metal packaging manufacturers eligible for the Levy discount. The Directive was introduced into UK legislation through the Pollution Prevention and Control (PPC) Act 1999. Regulations for England and Wales are contained in the PPC Regulations 2000. Similar regulations are to be introduced in Scotland and N. Ireland.
The PPC Regulations are complex and still in draft form. Ultimately a PPC Authorisation itself will become the basis for determining eligibility for a Climate Change Levy discount. However, metal packaging operations are not due to be authorised under PPC until 2003 – hence DEFRA need to make judgements about the definition of eligibility before practical interpretations of the PPC regulations are fully developed by the Environment Agency.
In simple terms, sites that are using organic solvent materials are likely to be eligible. However, it should be noted that only the energy used in the solvent using process or processes that are "directly associated" with the process will be eligible.
Directly Associated Activities
An important aspect of eligibility under IPPC is the "directly associated activity". Directly associated activities are those that have a "technical connection" to an eligible activity and that can have an impact on emissions from the activity. These activities must be included in an IPPC licence.
The directly associated activity concept is very helpful in relation to Climate Change Levy discounts for metal packaging manufacturing plants as it allows certain key processes to be included within the scope of eligibility.
In particular, most parts of a continuous metal packaging production line that includes a solvent using step will be eligible.
The 90:10 Rule
Any site that uses energy in eligible processes is likely also to use energy in non-eligible processes that do not comply with the technical linkage rules described above. The most common example is a factory with an office attached. The energy use in the office is not eligible under the IPPC definitions. However, exclusion of all non-eligible energy can give rise to administrative complexity.
The 90:10 rule has been established to simplify operation of CCLAs in situations where the non-eligible energy use is small. If the energy used by the eligible processes is 90% or more of the total energy used in the facility then the Climate Change Levy discount will apply to the entire energy use of the facility.
If the eligible process accounts for less than 90% of the energy used in the facility then the Climate Change Levy discount will only apply to the energy used in the eligible process. In this situation you will need to establish what proportion of energy is used in the eligible process, preferably through use of sub-meters. If sub-meters are currently unavailable you can estimate the proportion of eligible energy use through calculations based on the expected energy consumption of each item of equipment. Sub-meters should be installed by the first milestone to provide a better estimate.
The 90/10 rule is applied on primary energy used (See Information Sheet 3).
Figure 2.1 Eligible Energy Consumption
