The Climate Change Levy (CCL), introduced by the UK government in April 2001, affects businesses’ environmental approaches to climate change impacts. It often raises questions among business operators who are paying standard VAT on their energy and compare gas and energy suppliers.
In this 2024 updated guide, we will demystify the CCL charge on your gas bill and help you understand how it might affect your business’s bottom line.
What is The Climate Change Levy (CCL)?
The Climate Change Levy (CCL) is an environmental tax on energy use, urging businesses to improve their energy efficiency and reduce emissions into the environment.
This charged amount supports reducing greenhouse gas emissions, encouraging employment opportunities, and stimulating investment in new technologies through contract energy management.
All businesses pay for the CCL charge on their gas bills, in particular, and on their energy bills, in general, regardless of the energy supplier they work with. It applies to all businesses in the public services, commercial, agricultural, or industrial sectors as a charge on “taxable communities” for lighting and heating. When looking for a business gas quote, it’s essential to consider these additional costs.
How is The CCL Charge on Gas Bill Calculated?
The CCl charge on gas bill is calculated based on one of the two methods: The main rate and the carbon price support rate. How much CCL your business has to pay depends on the amount of energy you consume, and the charge is based on per kilowatt hour (KWh).
- Businesses are charged for CCL main rates on gas (the same for other energy such as electricity, coal, lignite, coke, and petroleum coke).
- Meanwhile, the carbon price support rate (CPS) is responsible for the owners of electricity generating stations and operators of combined heat and power (CHP) stations.
The businesses that are eligible for the Climate Change Agreements (CCA) scheme to reduce energy use and carbon dioxide (CO2) emissions will receive a discount on their CCL, a critical aspect of any energy consulting business.
What is The Current CCL Charge on an Energy Bill?
Below you can see the latest CCL rates per kilowatt-hour on natural gas and electricity:
- Climate Change Levy rates of a gas bill
| Time Period | 1st April 2020 to 31st March 2021 | 1st April 2021 to 31st March 2022 | 1st April 2022 to 31st March 2023 | 1st April 2023 to 31st March 2024 | 1st April 2024 to 31st March 2025 |
|---|---|---|---|---|---|
| Natural Gas | 0.406p/kWh | 0.465p/kWh | 0.568p/kWh | 0.672p/kWh | 0.775p/kWh |
- Climate Change Levy rates of electricity bill
| Time Period | 1st April 2020 to 31st March 2021 | 1st April 2021 to 31st March 2022 | 1st April 2022 to 31st March 2023 | 1st April 2023 to 31st March 2024 | 1st April 2024 to 31st March 2025 |
|---|---|---|---|---|---|
| Electricity | 0.811p/kWh | 0.775p/kWh | 0.775p/kWh | 0.775p/kWh | 0.775p/kWh |
- Other energy sources included in the Climate Change Levy
Besides electricity and gas, CCL is also charged on taxable commodities used for lighting, heating, and power purposes of businesses, including petroleum, hydrocarbon gas in a liquid state, coal, lignite, and coke.
Need clarity on your energy costs? Our guide provides a detailed CCL charge on gas bill explained along with comprehensive energy bills explained to help you understand what you’re paying for.
Can Energy Suppliers Exempt from Paying the Climate Change Levy?
Yes, the energy suppliers who can be exempt from the CCL charge on gas bill include charities, not-for-profit organizations, and small businesses using energy below the minimal limits. In detail, if your business belongs to one of the following conditions, you could be exempt from paying the CCL:
- Your business uses too little energy: under 33kWh of electricity and/or 145kWh of gas a day.
- Domestic energy users, like homes, schools, caravans, and self-catering accommodations, do not need to pay the CCL.
- You are a charity organisation working on non-commercial activities.
Can Energy Suppliers Exempt from Paying the Climate Change Levy?
Yes, certain energy supplies are exempt from the main Climate Change Levy rate. These include:
- Exports (supplies not consumed in the UK)
- Liquefied petroleum gas and solid fuel for resale
- Specific transport-related uses
- Supplies to producers of taxable commodities (excluding electricity)
- Supplies to electricity producers, with some exceptions
- Supplies to combined heat and power stations
- Certain supplies by small generating stations
- Non-fuel uses
- Specific electricity supplies from quality combined heat and power stations
- Supplies for metallurgical and mineralogical processes
Regarding transport-related exemptions, the main Climate Change Levy rate doesn’t apply to supplies used for:
- Railway electrification
- Powering passenger ferries or non-rail vehicles
- Lighting passenger railway carriages
- Illuminating freight train driver cabs
- Lighting marine freight vessels on international journeys
These exemptions don’t cover supplies used for theme park transportation or museum trams.
Manage Your Energy Contract Effectively with Light Up Energy
The CCL charge on gas bill affects businesses’ energy consumption costs, requiring them to seek professional and experienced consulting services for optimized strategies.
At Light Up Energy, we offer comprehensive energy contract management to optimise your gas costs. Our expert consultants, part of our energy advisory service, continuously monitor energy markets to identify the best moments for savings.
We strategically time contract renewals to align with favourable market conditions and help you avoid costly rollovers.
Based on our large client contacts, we can negotiate preferential rates and terms that individual businesses might not be able to access. We compare prices from over 20 major UK energy suppliers, ensuring you get the most competitive offers. Our industry expertise will eliminate guesswork and maximise the value of your energy contract.
With Light Up Energy, you can focus on running your business while we manage your energy needs efficiently and cost-effectively. If you have any further questions, don’t hesitate to contact us!
FAQs
1. What happens if you do not register or pay the Climate Change Levy?
Your business must register for the Climate Change Levy. If you do not pay the Climate Change Levy – or you do not register – you’ll have to pay a penalty of £250 for each instance.
Your business must register for the Climate Change Levy and pay this charge with your energy bill, otherwise, you will have to pay a penalty of £250 for each instance.
2. What business sectors need to pay the main rate of CCL?
The industrial, commercial, agricultural, and public service businesses need to pay the main rate of CCL.
3. Are your businesses eligible to pay a reduced rate of CCL?
You might be an energy-intensive business with a climate change agreement with the Environment Agency to get a lower main rate of CCL. The reductions can reach up to 92% for electricity, 86% for gas, 77% for liquefied petroleum gas, and 86% for coal and other solid fossil fuels.
4. Is VAT charged on the Climate Change Levy?
Yes, the CCL charge on gas bill also includes VAT, which actually is a tax on a tax. That means most businesses are paying 20% higher for the original rate of CCL which is shown in the tables above.
5. What are Climate Change Agreements?
Climate Change Agreements (CCA) are voluntary agreements between the Environment Agency and UK industry in order to minimise energy use and CO2 emissions into the environment. At the same time, operators can get a discount on their CCL charges.
CCAs can be applied in various industries, including major energy-intensive processes like chemicals and paper, or supermarkets and agricultural businesses like intensive pig and poultry farming.
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