Climate Change Levy

The Climate Change Levy (CCL) is a tax on energy delivered to non-domestic users in the United Kingdom. Its aim is to provide an incentive to increase energy efficiency and to reduce carbon emissions; however, there have been ongoing calls to replace it with a proper carbon tax. The effect of the Climate Change Levy in increasing the price of electricity is to hinder the move toward electrification of heat: this is the key barrier in the UK preventing the decarbonisation of heating by using heat pumps.

Scope and purpose

Introduced on 1 April 2001 under the Finance Act 2000, it was forecast to cut annual emissions by 2.5 million tonnes by 2010, and forms part of the UK's Climate Change Programme. The levy applies to most energy users, with the notable exceptions of those in the domestic and transport sectors. Electricity from nuclear is taxed even though it causes no direct carbon emissions. Originally electricity generated from new renewables and approved cogeneration schemes was not taxed, but the July 2015 Budget removed this exemption from 1 August 2015, raising £450m/year.[1]

Rates

From when it was introduced, the levy was frozen at 0.43p/kWh on electricity, 0.15p/kWh on coal and 0.15p/kWh on gas.

A reduction of up to 90% from the levy may be gained by energy-intensive users provided they sign a Climate Change Agreement.[2]

Revenue from the levy was offset by a 0.3% employers' rate reduction in National Insurance. However, the Finance Act 2002 subsequently increased that rate by 1%, reversing the reduction. The revenue used to fund a number of energy efficiency initiatives such as The Carbon Trust but this is no longer the case. Revenue recycling was removed at the Spending Review 2010, with the revenue going to the Exchequer. [3]

In the 2006 budget it was announced that the levy would in future rise annually in line with inflation, starting from 1 April 2007.[4] In the 2018 Budget, it was announced that the rates of the Climate Change Levy would be adjusted until 2022 so that the gas rate reaches 60% of the electricity rate in 2021 to 2022. [5]

On 1 April 2013 the rates were set to:[6]

Electricity0.541 p/kWh
Gas0.188 p/kWh
LPG1.21 p/kg
Any other "taxable commodity"  1.429 p/kg

From 1st April 2019 the rates had increased to: [7]

Electricity0.847 p/kWh
Gas0.339 p/kWh
LPG2.175 p/kg
Any other "taxable commodity"  2.653 p/kg

Effective from 1st April 2020 the rates had increased to: [8]

Electricity0.811 p/kWh
Gas0.406 p/kWh
LPG2.175 p/kg
Any other "taxable commodity"  3.174 p/kg

See also

References
  1. "Summer Budget 2015" (PDF). HM Treasury. 8 July 2015. pp. 73 and 93.
  2. "CCL Rates and Allowances". Retrieved 1 January 2019.
  3. "Climate Change Levy rates" (PDF). Retrieved 7 December 2018.
  4. "Deloitte UK Budget Report 2006". Archived from the original on 10 May 2006. Retrieved 23 June 2006.
  5. "Changes to rates for the Climate Change Levy from 6 April 2020". GOV.UK. Retrieved 16 October 2020.
  6. HMRC Reference: Climate Change Levy rates
  7. "Climate Change Levy rates". GOV.UK. Retrieved 25 May 2019.
  8. "Climate Change Levy rates". GOV.UK. Retrieved 25 May 2019.

Further reading
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