What is the Climate Change Levy?

The Climate Change Levy (CCL), introduced in April 2001, is charged on business electricity, gas, and other taxable commodities used for lighting, heating, and power. It applies to businesses in the industrial, commercial, agricultural, and public sectors and is aimed at lowering greenhouse gas emissions. 

The CCL charge applies to: 

• Electricity 
• Natural gas 
• Petroleum and coal 
• Lignite and coke 
• Hydrocarbon gas in liquid form 

Road fuels and oils already subject to excise duty are exempt. 

Who pays the Climate Change Levy? 

Not all energy users are subject to the climate levy charge. The CCL energy charge applies to businesses purchasing taxable commodities for operational use. However, exemptions exist for: 

• Domestic customers 
• Charities: For non-business energy use 
• Low-energy users: Businesses with minimal energy consumption 

Check with your energy supplier to confirm your liability for the levy. 

What are the current Climate Change Levy rates? 

The Climate Change Levy rates are calculated per kilowatt-hour (kWh) of energy consumed and are reviewed annually. 

The current rates are: 

• Electricity: 0.775 pence per kilowatt-hour (kWh) from April 1, 2024, to March 31, 2025  
• Natural gas: 0.775 pence per kWh from April 1, 2024, to March 31, 2025  
• LPG: 2.175 pence per kilogram (kg)  
• Any other taxable commodity: 3.174 pence per kg  

The CCL is a two-rate tax that is charged on energy used for lighting, heating, and power purposes. The amount a business pays depends on the amount of energy it uses.  

These CCL rates are part of a long-term government strategy to encourage energy conservation. Your supplier calculates the levy and adds it as a separate line item on your energy bill, passing the amount to HM Revenue & Customs. 

Can you reduce your Climate Change Levy payments? 

The Climate Change Levy is based on your energy usage. Reducing your consumption will lower your levy payments. Here are some strategies to minimize your CCL charge: 

1. Sign a Climate Change Agreement (CCA) 

Businesses in energy-intensive industries can sign a Climate Change Agreement, committing to specific energy efficiency improvements in exchange for up to a 90% reduction in the CCL charge. 

2. Improve energy efficiency 

Small changes can make a big difference in reducing energy consumption and lowering your climate levy charge: 

• Optimise heating and cooling: Don’t heat or cool unoccupied spaces, and ensure systems are off during non-working hours. 
• Install light sensors: Automating lighting can cut energy waste by up to 30%. 
• Turn off equipment: Encourage employees to switch off computers and other devices overnight to avoid standby energy consumption. 
• Adjust thermostats: Lowering the temperature by just one degree can significantly reduce energy usage. 

Practical steps to make your business energy efficient 

Enhancing your energy efficiency benefits the environment, improves your public image, and reduces your energy bills and climate levy charges. 

Monitor energy usage 

Installing a smart meter provides real-time insights into your energy consumption, helping you identify and address inefficiencies. 

Upgrade to energy-efficient lighting 

Switch to LED lighting, which lasts longer and consumes significantly less energy. This can reduce lighting costs by up to 75%. 

Conduct an energy audit

An energy audit highlights areas where your business can cut energy use. Your energy supplier or a consultant can help arrange this. 

Stick to sustainable practices 

While renewable energy is no longer exempt from the Climate Change Levy, adopting sustainable practices and green tariffs demonstrates your commitment to reducing environmental impact. 

The Climate Change Levy is an essential tool for encouraging businesses to prioritize energy efficiency and lower their carbon footprint. Understanding what the Climate Change Levy is, who pays the Climate Change Levy, and how to reduce its impact ensures your business is prepared to manage these costs effectively. 

If you want to cut your business energy bills, it’s a good idea to compare quotes and fix your rates. Call our energy experts today on 0800 140 4667.