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Published On: Thu, Feb 14th, 2019

The Climate Change Levy (CCL) explained

The Climate Change Levy is an environmental tax most energy users in the UK pay on their consumption of fuel. Domestic customers are exempt, along with the transport industry, which is why you might be unaware the Climate Change Levy exists until you launch a business and receive your first energy bill.

The following is a basic introduction to the CCL, including why it exists, the rates it charges different businesses, and how you can qualify to pay a reduced rate.

photo/ Pete Linforth

What is the Climate Change Levy?

The Climate Change Levy was introduced in April 2001 as part of the UK’s Climate Change Programme and is intended to incentivise businesses to increase their energy efficiency and cut their greenhouse emissions. It’s a tax levied on business’ use of electricity and gas as well as liquified petroleum gas (LPG) and solid fuels like coal, coke, and petroleum coke, used for heating, lighting, and power purposes.

The levy is charged at either the main rate or the Carbon Price Support (CPS) rate.

CCL Main Rate

The main rate of CCL is paid by businesses in the following sectors:

  • industrial
  • commercial
  • agricultural
  • public services

The main rates for CCL are as follows:

Taxable Commodity 1 April 2018 – 31 March 2019 1 April 2019 – 31 March 2020
Electricity (£ per kilowatt hour) £0.00583/kWh £0.00847/kWh
Natural gas (£ per KWh) £0.00203/kWh £0.00339/kWh
LPG (£ per kg) £0.01304/kg £0.02175/kg
Another other taxable commodity (£ per kg) £0.01591/kg £0.02653/kg

Photo/donkeyhotey donkeyhotey.wordpress.com

You won’t pay the main rates of CCL on certain supplies if you’re one of the following:

  • a business that uses a small amount of energy: de minimis supplies are automatically treated as supplies for domestic use, even when they are supplied to a business. For more information, see below.
  • a charity engaged in non-commercial activity, for example the sale of donated goods; the hiring of a charity-run space (eg. village halls); and the provision of membership benefits by clubs and associations.
  • a domestic energy user. This includes not just homes and flats but also armed forces residential accommodation; caravans; children’s homes; homes for the elderly and disabled; hospices; houseboats; monasteries, nunneries and similar religious communities; school and university residential accommodation for students and pupils; self-catering holiday accommodation; and supplies to community heating schemes. Hospitals, prisons, hotels, and inns don’t qualify as domestic users.

If you’re a business, you qualify as a small user of electricity if your use falls below the following thresholds:

Commodity Limit
Electricity (metered and unmetered) <1,000 kWh per month
Piped gas <4,397 kWh per month
LPG any number of cylinders, each less than 50kg in weight; customers who have a tank capacity for LPG of less than 2 tonnes
coal or coke <1 tonne

 

The following fuels (electricity, gas, and solid fuels) are also exempt from the main rate of CCL:

  • fuels that won’t be used in the UK
  • fuels supplied to or from combined heat and power (CHP) schemes registered under the CHP quality assurance (CHPQA) programme
  • fuels used to produce electricity in a generating station with a capacity of 2MW or greater
  • fuels used in certain forms of transport
  • fuels that won’t be used as fuels (eg for heating, lighting, or power)

Some of these fuels will be charged at the reduced CPS rate. Read on:

CPS Rate

The reduced carbon price support (CPS) rate is paid on fuel—gas, LPG, coal and other solid fuels— used in electricity generating stations and combined heat and power (CHP) stations. In Northern Ireland, fuel used by small generators, stand-by generators, and generating stations is also charged at the CPS rate.

The CPS rate for the Climate Change Levy is as follows, with different rates applicable in Northern Ireland:

 

Commodity CPS Rate until 31 March 2019
Gas (£ per kWh) £0.00331/kWh
LPG (£ per kg) £0.05280/kg
Coal and other solid fuels (£ per gigajoule (GJ) on gross calorific value (GCV)) £1.54790/GJ

 

How to Pay a Reduced Rate of CCL

If you’re an energy-intensive business, you can qualify for a reduction on the main rate of CCL if you enter into a climate change agreement (CCA) with the Environment Agency, detailing how you’ll reduce your business’ energy consumption and carbon emissions.

Businesses bound by a CCA will receive a reduction of 90% on the main CCL rate for the consumption of electricity and 65% reduction for the consumption of other fuels.

A wide range of energy-intensive businesses are eligible for reduced rates with a CCA, including those in the paper and chemical industries, supermarkets, and agricultural businesses including intensive pig and poultry farming.

Author: Laura Brown

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