What is the Climate Change Levy (CCL)?
The Climate Change Levy (CCL) is a government scheme that places a tax on all UK businesses for their energy use which is charged at the point of supply and is added to all business energy bills. The levy includes all energy including electricity, gas, solid fuel, and liquid petroleum gas (LPG).
What Are the latest Climate Change Levy Rates?
There are two Climate Change Levy rates that are administered differently:
- Main rates apply to electricity, gas, and solid fuels
- Carbon price support (CPS) rates apply to gas, LPG, coal, and other solid fossil fuels
The main rates are billed as an element on the business’s energy bill for each fuel that they use. Some businesses can pay a reduced amount of the main rate if they have signed up for the Climate Change Agreement with the Environment Agency. This agreement only applies to energy-intensive businesses.
The carbon price support rates are the rates that apply to some energy generators, such as electricity generating businesses and combined heat and power operators.
Smaller generators, generators in Northern Ireland, and standby generators are exempt from the carbon price support rates. The carbon price support rates apply when a generator has their own supply of fossil fuels that are used to generate electricity.
Main rates of CCL
| TAXABLE COMMODITY | RATE FROM 1 APRIL 2021 | RATE FROM 1 APRIL 2022 | RATE FROM 1 APRIL 2023 |
|---|---|---|---|
| Electricity (pence per kilowatt hour (kWh)) | 0.775 | 0.775 | 0.775 |
| Natural gas (pence per kWh) | 0.465 | 0.568 | 0.672 |
| LPG (pence per kilogram (kg)) | 2.175 | 2.175 | 2.175 |
| Any other taxable commodity (pence per kg) | 3.640 | 4.449 | 5.258 |
Percentage discount for holders of a CCA
| TAXABLE COMMODITY | RATE FROM 1 APRIL 2021 | RATE FROM 1 APRIL 2022 | RATE FROM 1 APRIL 2023 |
|---|---|---|---|
| Electricity | 8% | 8% | 8% |
| Natural gas | 17% | 14% | 12% |
| LPG | 23% | 23% | 23% |
| Any other taxable commodity | 17% | 14% | 12% |
CPS rates of CCL
| CPS RATE COMMODITY | 1 APRIL 2016 TO 31 MARCH 2025 |
|---|---|
| Gas pence per kilowatt hour (kWh) | 0.331 |
| LPG pence per kilogram (kg) | 5.280 |
| Coal and other solid fossil fuels - pence per gigajoule (GJ) on gross calorific value (GCV) | 154.790 |
Source: gov.uk
Who Pays the Climate Change Levy?
Businesses who have to pay the main rate are:
- Industrial
- Commercial
- Agricultural
- Public services
Some exemptions apply that means you do not pay the main rate:
- Businesses with smaller energy consumption
- Charities who have non-commercial activities
- Domestic energy users including businesses that house domestic users, such as residential homes, rental businesses including holiday lets and student accommodation, and community heating schemes
What is the Climate Change Levy Exemption?
Ofgem administers the Climate Change Levy exemption on behalf of the HM Revenue and Customs (HMRC) for renewable energy generation, which is also known as the Levy Exemption Certificates (LEC). In Ireland, the exemption is administered by the Northern Ireland Authority for Utility Regulation (NIAUR). The exemption acts like a certification scheme that gives exemptions to electricity generated by renewable sources from April 2001 and combined heat and power (CHP) electricity through indirect supplies from April 2003. Electricity generated by renewable sources was no longer eligible for the Levy Exemption Certificates from 1 August 2015.
The certificates from the exemption are used to demonstrate that the electricity is derived from the tax-exempt sources to the HMRC. The end user of the electricity is the person that gets the benefit of this Climate Change Levy exemption.
Does the Climate Change Levy Apply to All Fuels?
There are some exemptions to the main rates of the Climate Change Levy that apply to electricity, gas, and solid fuels, these are:
- Energy not used in the UK
- Some eligible combined heat and power (CHP) schemes which are registered in the CHP quality assurance programme
- Electricity from renewable generators who were eligible for the Climate Change Levy exemption prior to 1 August 2015
- The fuel is used in an electricity generating plant with a capacity over 2MW
- It is not used as fuel
- It is used to power transport that is certified as exempt
What is the Climate Change Agreement?
The Climate Change Agreement is a voluntary arrangement between the Environment Agency and UK businesses to reduce energy consumption and carbon dioxide emissions from their UK operations. As a reward for participating in the Climate Change Agreement, businesses receive a discount on their Climate Change Levy. This discount is worth:
- 90% reduction on electricity
- 65% reduction on other fuels
The current and future percentage discount rates for Climate Change Agreement participants are available on Gov.uk.
The Environment Agency administers the Climate Change Agreement and there are two types of agreement – umbrella agreements and underlying agreements. Umbrella agreements are those sectors that have been set targets collectively by the governments. Underlying agreements are more specific to a site or group of sites operated by a business within a sector.