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The Ultimate Business Energy Guide to the Climate Change Levy

What is the Climate Change Levy?

The Climate Change Levy (CCL) is an environmental tax that was designed to encourage businesses to become more environmentally friendly. It was formally introduced in April 2001, as park of the UK's Climate Change Programme.

The tax seeks to deter businesses from relying too heavily on fossil fuels (electricity, gas and solid fuels) and switch to renewable sources of energy such as solar, wind and hydro power.

Who is affected?

Those who work in industrial, commercial, agricultural or public service sectors are all eligible for the main rates of CCL.

A business may be exempt or eligible for reduced rates if they’re a:

  • Small business using very little energy (less than 33 kWh (electricity) and/or 145 kWh (gas) a day)
  • Domestic energy user
  • Charity engaged in non-commercial activities

In addition to the above, energy is also exempt from the CCL if it:

  • won’t be used in the UK
  • won’t be used as fuel
  • will be used to generate electricity
  • been supplied from certain combined heat and power schemes

If the business is one which is particularly energy intensive, or horticultural, it may be eligible to pay a reduced rate. This would require an agreement to be made with the Environment Agency by entering into a climate change agreement (CCA).

This allows heavy energy usage businesses to receive up to 90% reduction on charges for electricity and a 65% reduction for gas, liquefied petroleum gas (LPG), coal and other solid fuels.

Full details can be found here.

Tax reductions may also be granted if you can demonstrate that you are operating more efficiently and producing less waste. There are various schemes that one can apply to in order to be eligible for these reductions, usually requiring businesses to agree to specific targets.

Full details can be found here.


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How is it paid?

Each individual business must register for the CCL and would be liable to pay a penalty if they fail to do so. The main rates of the CCL are itemised on your business energy bill.

The rates as of 1st April 2016 are;

Electricity: 0.00559 pence per kWh

Gas:  0.00195 pence per kWh

This is set to increase year-on-year reaching 0.00847 p/kWh (Electricity) and 0.00339 p/kWh (Gas) by 1st April 2019.

How will the CCL affect my business?

The CCL will have already been added to your business electricity and gas bills by your supplier, who then collects it and pays it to HMRC.

If you are not eligible for a deduction or exemption there are alternative ways to reduce your business energy bills through energy efficiency measures, examples of which can be found here.

The easiest way to reduce the cost of your energy bills is by making sure you are on the cheapest tariff available.  Why not see how much you can save by comparing over 150 deals from 19 suppliers today, using our business energy comparison engine.

Alternatively, one of our energy consultants would be more than happy to talk you through the options available, just call 0800 9888 375.