What is the Climate Change Levy? Rates, Exemptions and Who Pays It
The Climate Change Levy (CCL) is a government tax applied to business gas and electricity. It is designed to encourage organisations to improve energy efficiency and reduce carbon emissions. For most businesses, the CCL appears as a separate line on monthly business energy bills and is calculated based on the volume of energy used.
Because the levy is reviewed annually, it can influence overall energy costs and forward budgeting. The CCL is expected to rise again in April 2026, which will increase the tax element within many business energy bills, even if wholesale prices remain stable. It sits alongside other non-commodity charges and forms part of the UK’s wider approach to reducing greenhouse gas emissions.
In this guide, we provide an overview of current CCL rates, explain who must pay them, and outline the main exemptions available to eligible businesses.
What is the Climate Change Levy?
The CCL is an environmental tax charged on electricity, gas and certain other fuels supplied to businesses in the UK. It was introduced to encourage commercial and public sector organisations to reduce energy consumption and cut carbon emissions.
CCL is applied as a set rate per kilowatt hour (kWh) of energy used. Energy suppliers add it to your bill and collect it on behalf of HM Treasury. It is not based on your contract type or wholesale energy rate, but on the volume of taxable energy your business consumes.
For most organisations, the levy applies to electricity and gas used for commercial purposes. Domestic supplies are excluded, and some sectors may qualify for exemptions or discounts under specific government schemes.
In practice, the CCL increases the overall unit cost of energy. While it is a policy-driven charge rather than a market-based one, it forms a consistent part of many business energy bills and should be factored into cost planning.
What are Climate Change Levy rates?
The CCL rates are calculated per kWh for gas and electricity, and per kilogram for solid fossil fuels and liquefied petroleum gas. For the period between April 1, 2024, and March 31, 2025, the UK government has aligned the rates for electricity and natural gas to reflect a more balanced approach to carbon dioxide emissions across different fuel types.
The current main climate change levy rates are as follows:
- Electricity: 0.775 pence per kWh.
- Natural gas: 0.775 pence per kWh.
- Liquefied Petroleum Gas: 2.175 pence per kilogram (kg).
- Other taxable commodities (including coal, lignite, and coke): 3.174 pence per kg.
These CCL rates are projected to increase in future fiscal years, with the levy rate for electricity and gas set to rise to 0.801p per kWh from April 2026. Financial planning for energy-intensive businesses must account for these incremental increases to ensure accurate energy costs projections and operational stability.
How the Carbon Price Support Rate affects energy bills
The Carbon Price Support Rate is a separate element linked to the CCL, aimed at electricity generators rather than end users. It applies to the fossil fuels, such as natural gas and coal, used by generating stations to produce power, making high-carbon electricity generation more expensive and encouraging investment in lower-carbon technologies.
The rate is currently frozen at £18 per tonne of carbon dioxide until 2028, providing a degree of market certainty. While generators pay this charge directly, the cost can filter through into wholesale electricity prices and, in turn, business energy bills. Businesses operating their own generating stations above 2MW capacity may also be liable, creating a direct link between carbon emissions and overall tax exposure.
Who pays the Climate Change Levy?
If you run a business in the UK and use electricity or gas for commercial purposes, you will usually pay the CCL. Your energy supplier adds the levy to your business energy bill and collects it on behalf of the government. It is charged based on the amount of taxable energy your business consumes.
Domestic households do not pay the levy. Some organisations may qualify for reliefs or reduced rates, such as charities using energy for non-business activities, businesses that fall below certain low-usage thresholds, or eligible energy-intensive industries under government schemes. For most business owners, however, the CCL is a standard and ongoing part of overall energy costs.
What is the Climate Change Levy exemption?
Not every organisation is required to pay the full levy rate, as the government provides several CCL exemptions to support specific social and industrial objectives. Identifying whether your business qualifies for these exemptions can result in a material reduction in the total energy bill.
Common CCL exemptions include:
- Domestic energy users: energy used in residential settings, including schools, caravans, and self-catering accommodation, is generally exempt from the levy.
- Small energy users: if a business uses less than 33kWh of electricity or 145kWh of gas per day, they are classified as a de minimis energy user and do not pay the CCL.
- Non-commercial activities: energy used by a charity engaged in non-commercial activities is exempt from the levy.
- Metallurgical and mineralogical processes: specific industrial processes, such as the manufacture of glass or metal casting, have been exempt from the main CCL rates since 2014.
To claim these CCL exemptions, a business must typically submit a PP11 supplier certificate to their business energy supplier, confirming their eligibility for the reduced rate or full exclusion.
What is a Climate Change agreement?
A Climate Change agreement (CCA) is a voluntary scheme between eligible energy-intensive businesses and the UK government. In return for committing to specific energy efficiency or carbon reduction targets, participating businesses receive a significant discount on the CCL applied to their electricity and gas.
To qualify, your business must operate within an approved energy-intensive sector and meet defined performance targets over agreed reporting periods. If you meet those targets, you retain the levy discount. If you fail to meet them and do not take corrective action, the discount can be withdrawn.
For qualifying businesses, a CCA can reduce overall energy costs. However, it also introduces reporting and compliance responsibilities that must be managed carefully to avoid losing the benefit.
Operational risks and compliance exposure
Failure to manage your Climate Change Levy obligations correctly can create financial exposure and unexpected backdated charges. If your business energy supplier applies the levy incorrectly, or if you do not renew required CCA documentation on time, costs can build up across several billing cycles before the issue is identified.
The levy is governed primarily by the Finance Act 2000 – Schedule 6, alongside the Climate Change Levy (General) Regulations 2001. These regulations set out who is liable, how the levy is calculated and where exemptions or reliefs apply. Because the framework is legislative rather than contractual, non-compliance can result in formal assessments, interest and penalties.
If your business generates its own electricity or operates combined heat and power systems, the compliance position becomes more technical. You must be properly registered with the relevant authorities and understand how the carbon price support rate applies to any taxable fuels used on site.
Given the complexity of the calculation methods, some organisations unintentionally underpay or overpay. Underpayment can lead to future audit adjustments and additional charges. Overpayment reduces working capital unnecessarily. Periodic reviews of how climate change regulations apply to your sites can help reduce exposure and support more accurate cost forecasting.
How Business Utility Hub Can Help
At Business Utility Hub, we do more than compare unit rates. We review the full structure of your business energy bills, including the CCL and other non-commodity costs that are often overlooked.
For many organisations, CCL represents a material proportion of overall spend. We break down how the levy is applied, check that the correct rate is in place and identify where reliefs or exemptions may apply. If you qualify for a reduced rate, we support you with the preparation of PP11 or PP10 declarations and liaise directly with your energy supplier to make sure the correct levy treatment is reflected on your account.
We also monitor changes to carbon price support and wider climate change legislation. Because rates are reviewed annually, forward planning matters. Our team keeps you informed of upcoming adjustments so you can factor them into budgets and contract decisions.
If you operate in an energy-intensive sector, we can guide you through the process of assessing eligibility for a Climate Change Agreement. For smaller businesses concerned about rising energy costs, we provide a clear, practical review of where tax and network charges are increasing overall exposure.
Our approach is straightforward. We analyse your data, explain the numbers clearly and handle the conversations with suppliers where needed. The result is greater control over your costs and confidence that your levy position is correct.
Review your Climate Change Levy charges
If you need to review the CCL charges on your energy bill or wish to explore your eligibility for an exemption, call 0800 781 2700 to speak with our team. Alternatively, email savings@businessutilityhub.co.uk for a professional consultation.
