Last edited 17 Mar 2016

Climate Change Levy

The Climate Change Levy (CCL) was introduced in the UK by the 2000 Finance Bill and came into force on April 1 2001. It is a tax on energy use intended to promote energy efficiency and to encourage investment in energy saving equipment. It was originally suggested that it would reduce carbon dioxide emissions by at least 5 million tonnes by 2010 as part of the UK government’s strategy for meeting its commitments under the Kyoto Protocol.

For the purposes of the Levy, energy use refers to electricity, gas, liquid petroleum gas and solid fuel. The CCL is charged by energy suppliers on behalf of the government from most businesses and public sector bodies that pay VAT at the standard rate. Domestic and charitable non-business energy use is exempt from the CCL, as is energy from some renewable sources and combined heat and power (CHP). There are also partial exemptions for energy intensive users and horticulture users. Ofgem administers the exemption certification scheme for renewable sources and combined heat and power on behalf of HMRC.

There are two rates of Climate Change Levy:

  • The main rates of CCL.
  • The Carbon Price Support (CPS) rates of CCL.

The main rates of CCL are charged on the supply of specified energy products for use as fuels. The CPS rates are charged on the supply of specified energy products for use in electricity generation (Ref HMRC, Climate Change Levy - introduction to the two rates of CCL).

In the 2016 budget, it was announced the Carbon Reduction Commitment energy efficiency

scheme would be abolished and replaced, in a revenue neutral way, with an increase in the Climate Change Levy from 2019. This it was said was because the scheme had been 'bureaucratic and burdensome'.

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