In a drive to increase the overall energy efficiency of businesses in the UK and to reduce greenhouse gas emissions, the government introduced a levy known as the Climate Change Levy.

What is the Climate Change Levy?

To put it simply, the Climate Change Levy is a tax on the amount of energy a business (in industry, commerce and the public sector) uses. The tax is added to energy bills before VAT and often appears as a separate item on bills.

All money collected through the Climate Change Levy is then recycled back to businesses via a 0.3 per cent cut in employers’ national insurance contributions and via support towards energy efficiency and carbon-reduction equipment.

Current Climate Change Levy rates

Commodity Rate from 1st April 2016 Rate from 1st April 2017 Rate from 1st April 2018 Rate from 1st April 2019
Electricity 0.00559 p/kwh 0.00568 p/kWh 0.00583 p/kwh 0.00847 p/kwh
Gas 0.00195 p/kWh 0.00198 p/kWh 0.00203 p/kwh 0.00339 p/kwh
Petroleum gas or other gaseous hydrocarbon in liquid state 0.01251 p/kg 0.01272 p/kg 0.01304 p/kg 0.02175 p/kg
Any other taxable commodity 0.01526 p/kg 0.01551 p/kg 0.01591 p/kg 0.02653 p/kg

Note: facilities taking part in the Climate Change Agreements Scheme with the Department of Energy and Climate Change are eligible to pay a reduced rate of CCL – from 10%.

Who has to pay the Climate Change Levy?

The Climate Change Levy applies to all energy supplies to the industrial, commercial, agricultural and public service sectors. It does not, however, apply to the following:

  • Fuel consumed for producing other forms of energy (electricity, for example) or for non-energy purposes.
  • Energy consumed by registered charities for non-business use.
  • Fuel consumed by domestic consumers (households) or businesses in the transport sector.
  • Deminimus energy consumed by very small businesses.

What energy is taxable under the Climate Change Levy?

A range of energies are taxable under the Climate Change Levy – including electricity, natural gas, coal, lignite, petroleum and hydrocarbon gas (as liquids).

Commodities that are exempt are:

  • Oils which are already subject to excise duty.
  • Fuels used by good quality CHP (combined heat and power) schemes.
  • Fuel used as a feedstock.
  • Electricity used for certain process – such as the chlor-alkali process, or primary aluminium smelting.

Climate Change Levy Benefits?

The Climate Change Levy plays a huge role in helping the UK reach its targets for reducing the level of greenhouse gases. Its overall aim is to promote energy efficiency and encourage investments in new types of energy.

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