The Climate Change Levy (CCL) is one of a number of environmental tax and relief schemes in place designed to encourage businesses to operate in a more environmentally friendly way.
Here’s all you need to know about how the CCL works and how your business may be able to pay a reduced rate.
What is the Climate Change Levy?
The Climate Change Levy was introduced in April 2001 in an effort to encourage business customers in the industrial, commercial, agricultural, and public services sectors to be more energy efficient in how they operate, and to reduce their carbon emissions.
The CCL is charged on taxable commodities for heating, lighting, and power purposes, such as natural gas, electricity, petroleum, and coal. It is not charged on-road fuel and other oils that are already subject to excise duty.
CCL is either paid at the main rate or the Carbon Price Support (CPS) rate, as outlined below:
- Main rate All businesses in the industrial, commercial, agricultural, and public services sectors will be charged CCL at the main rate on electricity, gas, and solid fuel (such as coal).
- Carbon Price Support rate You’ll pay this rate if you own electricity generating stations or you’re an operator of combined heat and power stations. Note, however, if you generate your own energy and make money via the Feed-in Tariff, it’s unlikely you will have to pay the levy as you’ll be classed as a small generator.
How much is the Climate Change Levy?
As of 1 April 2020, the main levy stood at a rate of 0.811p per kWh (kilowatt hour) for electricity and 0.406p per kWh for gas. On 1 April 2021, the rate will reduce to 0.775p per kWh for electricity and increase to 0.465p per kWh for gas.
This is because electricity is seen as a ‘greener’ energy source than gas because it can be generated from renewable sources, such as wind and solar.
Your energy supplier will calculate the CCL and automatically add it to your bill where it will be listed as a separate item. Once it has been collected, the charge will be passed on to HMRC.
Do all businesses have to pay the CCL?
Certain businesses may be exempt from paying the main rate of CCL, such as:
- businesses that use small amounts (de minimis levels) of energy
- domestic energy users, for example homes, schools, self-catering holiday accommodation and caravans
- charities engaged in non-commercial activities.
How can my business pay a reduced rate on CCL?
If your business is not exempt, you may be able to reduce the amount you pay by making your business more energy efficient. The most effective way to do this is to sign a Climate Change Agreement (CCA) which may give you a discount of up to 90% in the CCL rate paid on electricity bills and a 65% reduction on all other fuels.
In return you must make improvements to your business’ energy efficiency and reduce your average energy consumption.
By signing a CCA, you will agree to measure and report your business’ energy use and carbon emissions against agreed targets over four two-year target periods. If, after each period, your business has met its targets you can stay in the scheme and receive the CCL discount.
How can I make my business more energy efficient?
There are several steps you can take to help your business become more energy efficient, many of which are relatively straightforward. By carrying out these measures, not only will you reduce your business carbon footprint, you’ll also save money.
Turn off office equipment
Office equipment such as laptops, printers and photocopiers may be essential for your business, but they also use a lot of energy. Make sure equipment is switched off overnight and enable energy-saving features to ensure equipment automatically powers down when not in use.
Change the light bulbs
Fitting energy-efficient light bulbs is a quick but effective way to reduce the amount of energy your business uses. LED lighting uses 75% less electricity than equivalent incandescent lighting and produces little carbon dioxide.
Install light sensors
Fitting sensors that turn lights on when someone enters the room and switch them off again when no activity is detected for a certain period will also reduce energy wastage by around 30%.
Adjust the thermostat
Turning down the thermostat by one degree can make a big difference to energy bills. Around 16 degrees is adjudged best for warehouses, and 20 degrees for offices. You may want to choose a different setting, of course – but it’s best not just to pick a random number and assume it’s right. Many firms involve their staff in determining the right ambient temperature for their workplace.
Fit a smart meter
A smart meter will show you where your business uses most of its energy and therefore where you need to reduce it.
Consider insulation
Make sure hot water tanks, boilers and pipes are adequately insulated and that you’ve put a stop to any draughts around the building. You could even consider investing in cavity wall insulation if it’s not already in place.
