What is the Climate Change Levy?
12th April 2019
The Climate Change Levy (CCL) is a tax on energy usage that encourages users to improve energy efficiency. Applied to the bills of every UK business using energy, the CCL helps to cut the country’s carbon dioxide (CO₂) emissions.
Since its introduction in 2016, the levy has increased three times. However, the latest change is a reduction from £0.00847 to £0.00811 pounds per kilowatt hour (£/KWh). For comparison, the original introductory rate was £0.00559/KWh.
So why has the government chosen to decrease the CCL?
Goodbye CRC, hello CCL
In the 2016 budget, the Government announced the end of the Carbon Reduction Commitment (CRC) – mandatory for organisations consuming over 6,000 MWh per year. This means that the final CRC report was submitted in July 2019, with final allowances being surrendered in October 2019. The change also simplified the complex administrative process for those qualifying organisations with more than one Half Hourly (HH) meter.
To simplify the policy landscape and reduce administrative burdens on participants, the Government broadened the remit of the existing CCL scheme. Not only was it already in place, it also taxed users according to their usage: those organisations consuming more, contribute more. The downside is that all participants are exposed to CCL increases – not just those organisations previously registered under the CRC scheme.
Which organisations are affected?
CCL is a tax levied on UK businesses and organisations rather than individuals or domestic users. It’s possible to qualify as ‘exempt’ if you consume energy that you've generated from:
- Renewable sources, such as wind, solar and biomass
- Combined Heat and Power (CHP) sources – also known as co-generation, since it involves generating electricity and thermal energy in a single, integrated system
- Metallurgical and mineralogical processes
What can you do to reduce your CCL commitment?
If your organisation’s part of an energy intensive industry committed to improving energy efficiency and meeting carbon saving targets, you can register for a Climate Change Agreement (CCA). This voluntary arrangement can enable you to receive CCL discounts of up to 90%, while also improving your sustainability credentials.
Committing your organisation to the consumption of renewable electricity is a great way to start reducing your CCL commitment. You could also consider generating your own electricity using technologies such as solar photovoltaic (PV) panels and wind turbines. Self-generation can help reduce your dependency on the Grid, plus your exposure to changes in the unit price of your electricity and to third party costs. TPCs are the non-energy elements of your electricity bill, and they’re usually 50-60% of the total cost. What’s more, by selling any unused electricity back to the Grid, you could create additional revenue streams.
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