THE Climate Change Levy is the much talked about tax on energy use in industry, commerce, agriculture and the public sector. The Levy, set to be introduced in April. 2001, may add approximately 10-15pc to industry's energy bills. Some energy sources or users of energy may be exempt, some are estimated to be hit quite hard, and some energy users will be able to achieve discounts.

The levy, which will affect commercial uses of fuel for lighting, heating, motive power and power for appliances, will not directly affect consumers, but will require energy suppliers to pay. The charges will most likely be passed on from energy suppliers to consumers though, via their energy bills. The full rate of the levy will be 0.43p/kWh for electricity, 0.15p/kWh for gas and coal, and 0.07p/kWg for LPG. To calculate your business's approximate charge, a number of climate change levy models have been constructed. The models include data such as company fuel consumption and number of employees. An example of one of these models can be found on the Internet at www.bestfootforward.com

The Climate Change Levy has developed from global targets set in 1992 to reduce the amount of greenhouse gas emissions such as carbon dioxide, to 20pc of 1990 levels. To achieve these targets, the UK Government decided to reduce emissions using financial incentives. As transport fuels and mineral oils are already affected by excise duties, they will not be subject to the levy.

£1Bn of income is expected to be raised for the Government in the first year, who intend to make the levy revenue neutral by returning 0.3pc point reduction in employers' National Insurance contributions. However, many manufacturers report that they will still pay out far more through the levy than they will get back through the N.I. reduction. Approximately £150m has been designated to the energy efficiency and renewables industries in 2001/2002.

A great deal of controversy has surrounded the Climate Change Levy, resulting in a damning report from the Royal Commission on Environmental Pollution. The report urges the Government to rethink the levy and introduce a tax, based on the quantity of carbon dioxide emitted per unit of energy supplied. As it stands, the Royal Commission see the climate change levy to be 'too complex and poorly designed' and wish a tax to be imposed on high pollutant energy forms e.g. coal; while clean energy, such as solar and wind would be exempt.

Current exemptions to the climate change levy include:

Certain 'new' forms of renewable energy

'Good Quality' combined heat and power plants (CHP)

Energy products that act as both a fuel and a feedstock with the same process

Electricity used in some electrolytic processes

Natural gas in Northern Ireland (up to five years)

The intention of the Levy however is not for businesses to find how to avoid their duty by way of discounts or exemptions, but to offset the levy by becoming more environmentally aware and energy efficient. To many companies, this will appear too arduous or uncompromising a task and they may decide to pay the tax as the easier option; citing difficulties in affording to implement the appropriate changes and awareness of the various financial benefits of energy efficiency.

There is light at the end of the tunnel however, as the most cost effective environmental improvements are often the simplest and merely involve taking a step back from the business and gaining a wider view of the processes involved. The Energy Efficiency Best Practice Programme has performed studies revealing that 10-20pc can be shaved off energy bills through no-cost/low cost measures. For further information on the Energy Efficiency Best Practice Programme contact their helpline on 0800 58 57 94, or go to www.energy-efficiency.gov.uk

Incentives

An Enhanced Capital Allowances scheme will be launched later this year, giving 100pc first year allowances on plant and machinery that meet energy efficiency criteria. The scheme is set to cover eight areas: boilers; pipe insulation; motors; variable speed drives; lighting; refrigeration; thermal screens; CHP.

(eligible products will be place on the UK Energy Technology List)

£50m will be added to an energy efficiency fund from 2001, providing advice for small to medium sized enterprises for the development of low-carbon technologies and renewable energy.

The biggest incentive however, has got to be the positive financial implications for an energy efficient business. Your local environmental advice Organisation can help to achieve this (i.e. Bolton Business Environment Network -- 01204 288722, Bury BEA -- 0161 763 4185). Through these organisations, assistance in reviewing your energy efficiency and all other environmental implications can be simplified further. Experienced environmental advisers can assist in identifying areas of improvement and best practice. In addition, regular seminars, workshops and training courses are provided to address environmental issues.

The next Climate Change Levy Seminar is provided by the Bolton Business Environment Network and is to be held on Wednesday, September 20. For further information, please contact Anne Cletheroe on 01204 388722.