What is the Climate Change Levy?

Experts have warned that the planet is facing a climate emergency, with the global temperature increasing to dangerous levels. As such, government bodies, businesses and individuals alike are all feeling the pressure to do more when it comes to sustainability.

In response to climate change’s impact, the UK government has devised a number of tax and relief schemes designed to encourage businesses to practise greener operations. One such scheme is the Climate Change Levy, or CCL.

But exactly what is the Climate Change Levy, and what does it mean for your business?

What is the Climate Change Levy?

The Levy applies to businesses in the agricultural, commercial, public services and industrial sectors, charging ‘taxable commodities’ for heating, lighting and power. The CCL is paid at either the main rate or carbon price support rate (CPS):

Main rates

CCL main rates are listed on your commercial gas or electricity bill. Any business in the agricultural, commercial, public services and industrial sectors will be charged CCL at the main rate on gas, electricity and solid fuel.

CPS rates

CPS rates apply to businesses that own generating stations or operate combined heat and power stations. These rates vary for each commodity: kilowatt-hours for gas and electricity, and kilograms for any other taxable commodities.

How is the CCL charged?

Your energy suppliers are responsible for charging the CCL on your bill. Charges are collected by energy suppliers and then passed on to HMRC. The CCL rate and charge will often be displayed as separate items on your monthly gas/electricity invoice.

Businesses must register for the Climate Change Levy. Failing to pay or register can result in a £250 fine for each instance. The present and future charges for the CCL are:

1st April 2022 – 31st March 2023: 0.568p/kWh (Natural Gas) & 0.775p/kWh (Electricity)

1st April 2023 – 31st March 2024: 0.672p/kWh (Natural Gas) & 0.775p/kWh (Electricity)

Are there Climate Change Levy exemptions?

Certain businesses may be exempt from having to pay CCL charges. You will qualify for exemption if you meet any of the following criteria:

  • Your business uses less than 33kWh electricity and/or 145kWh gas in a day
  • You are a domestic energy user (e.g. energy used in homes, schools, self-catered accommodation and caravans.)
  • You are a charity involved in non-commercial activities.

Even if you are not exempt, it may still be possible to pay a reduced rate for the CCL if you meet certain criteria. The best way to do this is to enter into a climate change agreement (CCA) with the Environment Agency. This voluntary agreement will require you to reduce energy usage and CO2 emissions throughout your business.

How to make your business more energy efficient

Sustainability should be a continuous effort for businesses of any size and industry. It’s important to take significant steps towards greener operations, products and services. However, there are small changes you can make that will make a significant difference to your emissions, and possibly your CCL costs.

These include turning off office equipment rather than relying on standby, fitting a smart meter, installing light sensors, switching to LED lightbulbs, reducing computer usage and investing in insulation. Encouraging remote working can also cut energy costs across your business.

Looking for support in mastering energy management and sustainability in your business? You’re in the right place. Reach out to a member of our team today and find out how we can help you. Click here to get in touch with the team at Consultiv Utilities