What is the climate change levy?
The climate change levy (CCL) is a tax on the use of non-renewable energy by businesses and the public sector. Non-renewable energy includes electricity from the national grid, gas, coal and liquefied petroleum gas (LPG). The aim of the CCL is to encourage energy efficiency and reductions in greenhouse gas emissions.
Businesses pay the levy through their energy bills. If it applies to you, it is already included in your energy bills. This tax is offset by reductions in National Insurance Contributions.
The rate you pay depends on the type of fuel you use. The current rates (April 2009) are:
- electricity - 0.470p/kWh (pence per kilowatt hour)
- gas - 0.164p/kWh
- coal - 1.281p/kg (pence per kilogram)
- LPG - 1.050p/kg.
Exemptions and discounts from the CCL
There are some cases where the levy does not apply and some businesses and organisations are exempt or eligible for a discount. You need to apply for exemptions and discounts from HM Revenue and Customs.
The CCL does not apply to:
- fuels used by households (the domestic sector)
- fuel oils, as they are already subject to excise duty
- small businesses that use a domestic amount of energy
- energy used by registered charities for non-business use
- fuels used to produce other forms of energy, for example, electricity generation.
Exemptions from the CCL
Energy sources that are exempt from the CCL include:
- natural gas in Northern Ireland (until 31 March 2011)
- good quality combined heat and power (CHP) systems
- energy from renewable sources, except large hydroelectric schemes and some energy from waste facilities
- the transport sector, except energy supplied to run transport at theme parks or historical transport such as trams in museums
- energy supplies not used as fuel, such as feedstock for electrolytic processes and aluminium smelting
- fuel used as a raw material, for example coal used to make carbon filters.
Discounts from the CCL
If your business sector is energy intensive, your trade association may have a climate change agreement (CCA) with Defra. If you are in a CCA you can get an 80% discount from the CCL.
If you are in a CCA you will have to meet challenging targets for improving energy efficiency and reducing carbon emissions. You must meet the targets to claim your discount. You will lose the discount if you or your sector fail to meet the agreed targets.
Contact your trade association for details of any agreement which applies to your business sector.
Further information
HM Revenue and Customs provides detailed information and guidance on the climate change levy, including how to claim discounts and exemptions.
