Incentives, Trading and Allowances

With the drive to ensure that the UK (and other parts of the European Union) produces more of its energy requirements from renewable and sustainable sources, while at the same time reducing energy consumption, successive governments have introduced a wide range of financial incentives in relation to energy production and consumption.

Given the breadth and depth of these incentives, and their application to different technologies or sectors, it can be a daunting prospect for businesses and other organisations to identify the opportunities that these incentives bring. Likewise, businesses and other organisations find it difficult to negotiate their way through the maze of environmental levies and taxes that exist.

The introduction of a carbon “floor price” in the UK brings another dimension to this already complicated area. The Walker Morris Renewables, Energy & Resources Group is well-versed in the various financial incentives and levies that apply in the energy sector and can help you understand how these will affect your project.

  • ROCs, FITs and RHI: We have advised a number of clients on the impact of Renewable Obligations Certificates (ROCs) and Feed-in Tariffs (FITs) on their projects. We advised TEG Environmental on an arrangement to share Renewable Heat Incentive (RHI) income with the buyer of heat under a supply agreement, and advised developers of a number of solar schemes of the impact of the FITs scheme (particularly the recent changes). In addition, members of the Group has advised a large energy supplier on ROC trading contracts.
  • Emissions trading: The Renewables, Energy & Resources Group has advised a number of companies on the requirements of the EU and UK Emissions Trading Schemes to reduce greenhouse gas emissions and also on allowance trading agreements. This includes advising a client considering the acquisition of industrial facilities in Eastern Europe of the impact of Phase III of the EU ETS on the acquisition and how the allocation of allowances in Phase III could be factored into the purchase price.
  • Climate Change Levy: We regularly advise on the legal requirements of the Climate Change Levy and Climate Change Agreements for a number of different industries, helping clients understand their potential exposure. This area will become more relevant to clients as the UK government’s carbon “floor price” is implemented by means of a change to the Climate Change Levy regime.
  • Carbon Reduction Commitment (CRC): The CRC is now very much seen as an environmental tax rather than a trading system. This has resulted in the regime getting much more attention within organisations now that there is no potential income from the arrangements, only a cost. Our regulatory team has helped clients in both the public and private sector understand their obligations under the regime and what they have to do to comply with these obligations. We have recently advised a leading leisure centre operator on its CRC liabilities and to what it extent it could look to pass these liabilities onto others. In addition, we advised a client looking to acquire a mining operation on the merits of challenging enforcement action by the Environment Agency against the current owner of that operation in relation to CRC.

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