Data Centres required to comply with CCA

Summary and implications

The Chancellor of the Exchequer, George Osborne, announced in his Autumn Statement on 5 December 2013 that the Government will introduce a climate change agreement (CCA) for the UK data centre sector by the end of 2013.

CCAs are part of a package of government measures to tackle climate change that are designed to encourage UK business to save energy and reduce carbon dioxide emissions.

The package of mechanisms also includes the Climate Change Levy (CCL), the EU Emissions Trading System and the CRC Energy Efficiency Scheme (CRC).

What are climate change agreements?

CCAs are voluntary agreements containing targets for eligible industry sectors to increase energy efficiency or reduce carbon dioxide emissions. Operators who hold a CCA are eligible to claim a discount to the CCL charged on their energy bills. From 1 April 2013, participants can start claiming their CCL discount at the revised rate of 90 per cent for electricity and 65 per cent for other fuels. In addition, each data centre organisation will be eligible to claim a full or partial exemption from the CRC if enough of its total emissions are covered under a CCA.

What does this mean for the UK’s data centre sector?

Once the data centre sector receives its own CCA it will join approximately 50 other energy-intensive industries in the UK that have their own CCA. Most industry sectors with CCAs already in place have seen a marked reduction in energy costs whilst at the same time reducing carbon emissions.

Without a CCA in place, the data centre sector would have been at risk of losing valuable investment from both offshore and onshore investors, making the UK an economically unattractive location to operate data centres.

The recent announcement is even more significant given that the UK data centre sector is currently one of the largest in the world, using about 3GW of power, which is expected to rise significantly in the coming years.

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