Climate change levy
The Climate Change Levy (CCL) is a government-imposed tax on business energy use, charged at a set price per every unit (kWh) of gas or electricity a business consumes.
It is payable on energy used by the vast majority of non-domestic energy consumers, and is designed to encourage a reduction in carbon dioxide emissions in an effort to improve the UK’s energy efficiency.
CCL rates rise with inflation and can account for up to 15% of a business’s energy bill. The levy is not factored into the unit costs or standing charge set by your supplier.
The forms of energy covered by the levy are:
- Electricity or gas used by a business (but not energy acquired for resale).
- Hydrocarbon gases supplied in liquid form
- Coal and lignite.
- Petroleum coke.
From April 2015 until March 2016, the main rates of the levy are as follows:
- Electricity: £0.00559 per kWh.
- Gas: £0.00195 per kWh.
- LPG: £0.01251 per kilogram.
- Any other taxable commodity: £0.01526 per kilogram.
The main rates of CCL are applicable to your business if it belongs to any of these sectors:
- Public Services.
You must also pay CCL at the main rate if the energy your business produces is consumed by your business. It should be treated the same as supplying a third party consumer, and is classed as self-supply. However, if the energy is generated from renewable sources or 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.
For more information on renewable energy options for your business, click here.
The main rates of the levy are not applicable to businesses in the following categories:
- Business that consume less than 12,000 kWh per year – small quantities of fuel and power are automatically treated as supplies for domestic use even if they are supplied to a business.
- You’re a domestic user.
- You run a charity engaged in non-commercial activities.
Electricity, gas and solid fuel are normally exempt from the main rates of CCL if:
- The energy won’t be used within United Kingdom.
- They’re supplied to or from certain combined heat and power (CHP) schemes registered under the CHP quality assurance programme.
- Low-value solid fuel worth less than £15 per tonne and waste used as a source of energy.
- Oil-based fuels are exempt as they are either liable to road fuel duties or to other excise duties.
- They’re used to produce electricity in a generating station which has a capacity of 2MW or greater.
- If gas and electricity won’t be used as fuel for the business.
- If they’re used in certain forms of transport.
Climate Change Agreement
When the climate change levy was introduced, the position of energy-intensive industries was considered, and an agreement to provide discounts from the levy was made – the Climate Change Agreement (CCA). The CCA outlines that certain sectors with particularly high energy demands should qualify for significant discounts on the CCL – providing they make commitments to increase energy efficiency and reduce carbon dioxide (CO2) emissions.
Businesses that are part of the CCA are eligible to claim a discount on the CCL charged on their energy bills – up to a 90% reduction for electricity and a 65% reduction for gas, liquefied petroleum gas (LPG), coal and other solid fuel.
Some examples of energy-intensive industries are those that heavily involve the use of the following materials:
- Iron and Steel.
- Leather manufacture.
- Lead, zinc and tin production.
- Paper and paperboard manufacture.
- Copper production.
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