Climate Change Levy
The carbon tax designed to help increase energy efficiency and reduce the carbon emissions of UK businesses
Last updated: 05/04/2013. Next review: 10/07/2013
What is the Climate Change Levy?
Since 2001 all businesses in the UK have been subject to the Climate Change Levy. It is essentially a carbon tax that adds around 15% to the energy bills of all businesses and public sector organisations.
CCL In Summary
- The Climate Change Levy is a carbon tax that all businesses must pay
- CCL Rates are currently 0.524p/kWh for Electricity and 0.182p/kWh for Natural Gas
- It is collected automatically by your business energy supplier(s) on behalf of HMRC
- Charities are exempt
- Discounts of 65%-90% are available for businesses holding a valid CCA (Climate Change Agreement) [Link]
The CCL was introduced after the Kyoto Summit on Climate Change in 1997. The UK government set high targets for the amount of energy to be generated from renewable energy sources in the future, and the levy was introduced to fund investment in cleaner, greener energy.
Climate Change Levy Rates
The rates of the Climate Change Levy only rise with inflation, and have been at their current rates since 2009. It is charged at a flat rate on every kilowatt-hour (kWh) of energy used.
Rates from 1 April 2013:
- Electricity – 0.524p/kWh
- Natural Gas – 0.182p/kWh
- LPG – 1.172p/kg
- Any Other (Coal/lignite) – 1.429p/kg
How is the CCL collected?
The amount appears on your energy bills, as it collected by the electricity and gas suppliers on behalf of HM Customs & Excise. It should appear on your bill above the VAT line, and is also VAT chargeable.
Exceptions and discounts
Charities and non-business users are all ineligible for the levy. It is purely a business tax. Some businesses may be able to negotiate discounts and/or exemption through a Climate Change Agreement (CCA) or Levy Exemption Certificate (LEC).
Climate Change Agreements (CCA)
The government has established the 10 major energy intensive sectors, to which discounts on the Climate Change Levy of up to 80% can be negotiated providing they reach pre-agreed targets of CO2 reduction. [Link]
The list of energy intensive sectors can be found here on the Carbon Trust Website, along with more information on Climate Change Agreements and the Climate Change Levy.
Levy Exemption Certificates (LEC)
If your business buys renewable energy or implements other energy saving measures such as Combined Heat & Power systems, you may be eligible for a Levy Exemption Certificate.
This can be provided to HM Customs & Excise as proof of carbon-neutral energy consumption. More information can be found on the Ofgem page on Renewables Exemption here.
References & and Further Reading
Climate Change Levy exemption for renewables: Guidance for agents – Ofgem
Green taxes, reliefs and schemes for businesses – GOV.UK
Renewables Obligation (Wikipedia)
Climate Change And Business Implications – Business Balls