Climate change levy

We’ll help you understand the climate change levy (CCL) and how to manage its impact on your business.
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The climate change levy is a tax on gas and electricity supplies to business users, and on the consumption of fossil fuels for electricity generation. The main rate of the levy is 0.775p per kWh for both natural gas and electricity. On 1 April 2026, both rates will increase to 0.801p per kWh.

CCL is designed to help decarbonise the energy sector by encouraging a range of greener alternatives to meet businesses’ energy needs:

  • Combined heat and power plants
  • Green gas
  • Hydrogen
  • Battery storage and other embedded or local generation

Adapting to these new business models can be a challenge for many companies.

CCL exemptions and reliefs

Various users are exempt from the levy or can claim reliefs:

  • Domestic users
  • Charities without commercial activities
  • Businesses that only consume small amounts of energy (less than 145 kWh of natural gas a day and/or 33 kWh in electricity per day)
  • Community heating schemes
  • Combined heat and power plants
  • Energy-intensive businesses with a climate change agreement
  • Businesses with mineralogical and metallurgical processes
  • Businesses that use gas, electricity, coke or coal for non-fuel uses in their processes, such as electrolysis, steelmaking and other chemical processes

Some reliefs must be claimed by sending certificates to the energy supplier and HMRC.

Reducing your climate change levy rate

Businesses that entered into a climate change agreement with the Environment Agency before 30 June 2022 are eligible for a discount on the levy. Under such agreements, businesses stated that they would aim to reduce their carbon footprint.

If you entered into an agreement, the climate change levy rate is reduced by up to 89% on natural gas and 92% on electricity.

Installation of on-site renewable electricity generation or a combined heat and power plant is also a good way to reduce climate change levy and safeguard against further energy price rises. Renewable electricity use and qualifying ”good quality” electricity generated on-site from a combined heat and power plant are not subject to the climate change levy.

CCL support

Our specialist team has extensive experience dealing with CCL charges and exemptions. We can advise you on any reductions you might be eligible for, help with compliance, answer technical queries, analyse the impact of new business models and assist with HMRC enquiries and investigations.

If you have any queries about the climate change levy and the implications for your company, call us now.

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Frequently asked questions about the climate change levy

Carbon price support is the climate change levy rate that applies to fossil fuels, such as gas and coal, used in electricity generation. The electricity generator must register for the climate change levy and account for any tax due.

If you are exporting electricity to the grid for someone else to make an onward supply of electricity to an end user, you do not have to charge the climate change levy.

If you supply the end user yourself, you must consider whether the climate change levy should be charged. The rules are complicated and need in-depth analysis of the facts and circumstances. Call our experts to see how they can help.

CCL is shown as a separate line on invoices for gas and electricity. It forms part of the net price and is subject to VAT.

If the climate change levy is self-accounted for by a business with a climate change levy registration, as in the case of an electricity generator self-accounting for carbon price support, for example, no VAT is due. The climate change levy is declared on the climate change levy return and paid to HMRC.