An introduction to the ECA scheme

ECA stands for Enhanced Capital Allowance and denotes a scheme that is an integral part of the government’s environmental agenda. The ECA scheme has been introduced to manage climate change and is designed to motivate businesses to invest in equipment which will help to save energy.

Introduction of ECA

In 2001, the government introduced the ECA scheme to motivate businessmen to invest in energy saving and low carbon equipment. The program is designed to help the UK in reaching its Kyoto target i.e. reducing carbon emission by 20%.

Change in climate and temperature is one of the biggest threats to our Earth’s environment. R22 refrigerant is damaging the ozone layer which protects the planet from harmful ultra-violet rays. We need to take precautionary measures to save our planet from global warming. Carbon emissions produced by burning fossil fuels are the biggest cause of this problem. About half of these come for industrial and business processes.

There are three ECA schemes that offer enhanced tax relief for the investment in equipment which has environmental advantages like water efficient equipment, energy saving equipment and low carbon dioxide emission machinery.

What does the ECA Energy scheme entail?

The ECA scheme offers a tax incentive to businesses who buy equipment on the ETL. The Energy Technology List, or ETL, details the conditions for each type of technology. They list only those that meet their criteria. This is managed by the Carbon Trust on behalf of the government.