Climate Change Levy Explained

At a glance

  • Climate Change Levy (CCL) is a tax on certain energy supplies used by businesses and other non-domestic organisations.
  • The charge depends on the taxable fuel, quantity, applicable rate and any qualifying relief.
  • Domestic use, small quantities and some other uses can receive different treatment; charity status alone is not a universal exemption.
  • CCL is not a direct calculation of your organisation’s carbon emissions. Check HMRC’s current rates and conditions.

CCL can appear as a separate line on a business electricity or gas bill. Understanding what it is helps you check the calculation and ask informed questions. This guide explains the principles; eligibility for relief depends on the actual supply and use.

On this page

What the levy applies to

The main levy applies to taxable commodities including electricity, gas and certain solid fuels supplied for business and other non-domestic use. GOV.UK provides an overview of the levy and its scope.

For electricity and piped gas, the charge is normally based on taxable kWh. Other fuels can use different units. A household’s ordinary domestic supply is treated differently from a taxable business supply.

The name refers to an environmental tax, but the calculation is not a meter reading of emissions. Two organisations’ tax bills can differ because of relief or fuel treatment, not simply because one has a smaller carbon footprint.

How the charge is calculated

For a taxable quantity charged at one rate:

CCL charge = taxable quantity × applicable levy rate

For illustration only, 10,000 taxable kWh at an example rate of £0.008/kWh gives £80. That rate is deliberately an example, not a quotation of the current statutory rate.

Check whether the bill states the rate in pounds or pence. £0.008/kWh equals 0.8p/kWh, not 8p/kWh. A decimal-point error creates a tenfold difference.

Use HMRC’s published rates for the fuel and period concerned. If a bill crosses a rate change, check how the taxable quantity has been allocated. A changed levy line may reflect either consumption or the statutory rate.

Exemptions and small quantities

Not every non-domestic supply is charged at the main rate. Domestic and certain charity non-business uses, small quantities and specified uses can receive different treatment.

Small-quantity or “de minimis” rules depend on the supply and fuel, not simply the number of staff or whether an organisation calls itself a small business. HMRC publishes the relevant limits and exemption conditions. Do not turn a monthly threshold into a blanket annual test without checking the detailed rules.

Eligibility for one fuel does not automatically decide another. A site’s use can also change over time, so an old treatment should not be assumed to remain correct indefinitely.

Charities and mixed-use premises

Being registered as a charity does not mean every energy use is automatically exempt. Non-business activity, trading activity and mixed use need to be distinguished.

Where relief depends on a declaration, provide accurate information and keep the supporting calculation. A supplier may need evidence of the proportion of qualifying use. If the premises or activities change, review the declaration.

CCL and VAT are related parts of an energy bill but have their own rules. HMRC’s fuel and power VAT notice explains qualifying use and how CCL enters the VAT value where applicable. Do not assume every business bill is subject to the same tax treatment.

Climate Change Agreements and reduced rates

Eligible energy-intensive activities can participate in Climate Change Agreements, which can provide reduced CCL rates subject to scheme conditions and obligations.

This is not a general discount available to every business using a lot of electricity. Check eligibility, agreement coverage, certification and the reduction applicable to the fuel and period. The HMRC rates page includes the current reduced-rate information.

The value of a reduction should not be described as an automatic percentage saving on the whole energy bill: it applies to the levy element concerned, not necessarily the commodity cost, network charges or VAT.

Renewable tariffs and Carbon Price Support

A tariff marketed as renewable does not automatically remove CCL. The general exemption for renewable electricity generated on or after 1 August 2015 was removed. HMRC’s reliefs notice explains the relevant treatment and special cases.

Carbon Price Support is a separate set of CCL rates associated with certain fuels used in electricity generation. It should not be confused with the ordinary main-rate line a business sees for purchased electricity or gas.

If an exemption is claimed, ask which provision applies and what evidence supports it. A product name or environmental marketing claim is not a tax determination.

Checking the levy on your bill

  • Confirm the fuel and taxable quantity.
  • Check the statutory rate and its effective dates.
  • Recalculate the charge, watching pounds versus pence.
  • Confirm whether any exemption, certificate or reduced rate should apply.
  • Check changes in use or premises that may affect treatment.
  • Ask the supplier to explain the bill’s VAT calculation separately.

If the charge appears wrong, request the calculation and the basis for the treatment. Keep the bill, declarations, agreements and written response. For a disputed tax interpretation, use HMRC’s guidance and appropriately qualified advice rather than assuming a supplier’s label resolves it.

Energy use and environmental impact

Reducing taxable consumption can reduce the associated levy, alongside the consumption charge. That does not mean a lower tax bill alone proves an emissions reduction.

An organisation measuring emissions needs appropriate activity data and conversion factors. See the government’s greenhouse gas reporting factors. Keep financial savings, kWh savings and estimated emissions savings as separate measures.

Sources and further reading

Browse the Hub: SME resources · Environmental resources

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