You, as a business owner, will likely be familiar with the individual costs that make up your business energy bill. Unit rates and standing charges can be explained simply.
However, what about additional duties – like the Climate Change Levy (CCL)? Why is it charged? How much extra can the costs add to your bill? And is there any way of cutting it down?
What is the Climate Change Levy?
Introduced in April 2001, the Climate Change Levy (CCL) is an environmental tax on commercial energy use, including business electricity and business gas.
It was designed to encourage agricultural, commercial, industrial and public service businesses to become more energy efficient and reduce their carbon footprint.
It’s charged on taxable commodities supplied for heating, lighting, and power purposes to business customers.
These taxable commodities include hydrocarbon gas (liquid), coal, lignite, coke, natural gas, petroleum, and electricity.
It’s not charged on road fuel or other oils which are already subject to excise duty.
How much is the current Climate Change Levy rate?
There are two rates for the Climate Change Levy: the main rate and the Carbon Price Support rate.
You’ll pay a set amount based on how much energy your business uses.
Main rate
Any business that works in the commercial, industrial, agricultural, and public service sectors will be charged at the main rate for business gas, electricity and solid fuel. These charges will be listed on your energy bills.
The table below illustrates the main Climate Change Levy rates for the next two years:
| Time | Electricity | Gas | LPG | Other Taxable Commodities |
| 1st April 2024 to 31st March 2025 | 0.775p/kWh | 0.775p/kWh | 2.175p/kg | 6.064p/kg |
| 1st April 2025 to 31st March 2026 | 0.775p/kWh | 0.775p/kWh | 2.175p/kg | 6.064p/kg |
Carbon Price Support rate
If your business operates combined heat and power stations, or you own an electricity generating station, you’ll pay the Carbon Support rate.
His Majesty’s Revenue & Customs (HMRC) states your business will become liable for the Carbon Price Support rate when
• gas passes through the meter at the generating station
• LPG, coal or other solid fossil fuels are delivered through the entrance gate to the generating station.
The table below illustrates these Carbon Price Support rates for the next year:
| Time | Gas | Petroleum gas | Coal or other solid fossil fuels |
| 1st April 2016 to 31st March 2025 | 0.00331p/kWh | 0.05280p/kWh | 1.54790p/GJ |
Businesses that generate their own energy, such as through solar panels, are unlikely to pay the levy since they will be classed as a small generator.
How is the Climate Change Levy charged?
Business energy suppliers oversee adding the Climate Change Levy to your commodities.
On your energy bill, the levy charge will feature as a separate line item. Once your supplier has collected this, they’ll pass it on to HMRC.
Your business must register for the Climate Change Levy unless it is exempt. If you don’t register or pay the levy, you’ll face having to pay a penalty charge of £250 each time.
Who Is Exempt From Climate Change Levy?
If you meet the following requirements, your business may be exempt from having to pay the levy:
- You are a charity involved with non-commercial activities.
- Your company uses only a small amount of energy – around less than 145kWh of gas and 33kWh of electricity a day.
- You are a domestic energy user, such as homes, caravans, self-catering accommodation, and schools.
How Can My Business Pay A Reduced Rate On Climate Change Levy?
With the Climate Change Levy being charged according to usage, the most effective way to start saving is by reducing the amount of energy you use. You’ll cut your bills and reduce your emissions.
However, we know this isn’t a realistic option, particularly for larger businesses in high consumption industries. Signing a Climate Change Agreement (CCA) could be a beneficial alternative.
The Department for Business, Energy and Industrial Strategy (BEIS) announced the scheme will continue until March 2025.
With a CCA, you could cut the amount you pay on CCL rates significantly, by:
• up to 90% on electricity
• up to 65% on all other fuel types
In order to benefit, you’ll need to enter a contract outlining a commitment to reduce your average energy consumption, as well as steps you’ll take to become more energy efficient.
When you sign the CCA, you agree to measure and report on your business energy use and carbon emissions against specific targets over a certain period.
Once this period has passed and your business has achieved the set targets, you’ll receive your discount.
Want to find out whether your business is eligible for a CCA? Head over to gov.uk for more guidance.
What if I’ve overpaid on the Climate Change Levy?
If you think your organisation has paid too much on your CCL, it’s possible to reclaim it as a tax credit. You’ll need to complete a CCL200X postal form – which you can find on gov.uk.
How can a business reduce its carbon footprint?
Struggling to find ways of making your business more energy efficient? Here are some small operational changes that could help you to reduce your energy use, bills and carbon footprint.
1. Avoid heating / cooling empty spaces – if the spaces aren’t actively being used, you’re wasting energy by running heating and air conditioning units.
You can easily get around this with a thermostat set to automatically switch off during non-operational hours. And remember 20°C and 16°C are best for offices and warehouses.
2. Switch off equipment – electrical equipment continues to consume power – even when it’s on standby. Encourage your staff to switch off anything non-essential at the end of each working day.
3. Set hot water to 60°C – this should be more than enough for bathrooms, kitchen sinks and cleaning. And it’ll help you save money on gas and electricity.
4. Get energy efficient lighting installed – it can last for up to 10 times longer than regular bulbs and it can help you to cut costs by up to 75%.
5. Use a smart meter – a smart meter will help you to identify where and when you’re using most energy in your business. With these findings, you’ll be in the best place to make a plan to reduce waste.
What more can you do to reduce business energy costs?
Everyone knows you can lower your energy bills by switching to a different provider. However, did you know that you can reduce your carbon footprint by switching to a renewable business energy supplier?
You can add green credentials to your company and increase your corporate social responsibility. Plus, you’ll be helping the environment and encouraging the development of greener sources of energy.
Want to learn more about switching? Read our guide on ‘How to Switch Business Energy Suppliers’. Or use our quote tool today to see how much Utility Bidder could help you save today!
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