The Climate Change Levy (CCL) is a tax on energy delivered to non-domestic users in the United Kingdom.
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 United Kingdom's Climate Change Programme was launched in November 2000 by the British government in response to its commitment agreed at the 1992 United Nations Conference on Environment and Development (UNCED). The 2000 programme was updat ...
. 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
Cogeneration or combined heat and power (CHP) is the use of a heat engine or power station to generate electricity and useful heat at the same time.
Cogeneration is a more efficient use of fuel or heat, because otherwise- wasted heat from elec ...
schemes was not taxed, but
the July 2015 Budget removed this exemption from 1 August 2015, raising £450m/year.
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.
Revenue from the levy was offset by a 0.3% employers' rate reduction in
National Insurance
National Insurance (NI) is a fundamental component of the welfare state in the United Kingdom. It acts as a form of social security, since payment of NI contributions establishes entitlement to certain state benefits for workers and their famil ...
. However, the
Finance Act 2002
The Finance Act 2002 (c.23) is an Act of the Parliament of the United Kingdom prescribing changes to excise duties, Value Added Tax, Income Tax, Corporation Tax and Capital Gains Tax. It enacts the 2002 Budget speech made by Chancellor of the ...
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. However, revenue recycling was removed at the Spending Review 2010, with the revenue going to the Exchequer.
In the 2006 budget it was announced that the levy would in future rise annually in line with inflation, starting from 1 April 2007. 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.
Rates have changed as tabulated below.
See also
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Climate change in the United Kingdom
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Ecological tax reform
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Energy policy of the United Kingdom
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Energy use and conservation in the United Kingdom
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Renewables Obligation
References
Further reading
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External links
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HMRC â€
Climate Change Levy in depth
{{Energy in the United Kingdom, govreg
Taxation in the United Kingdom
Climate change policy in the United Kingdom
2001 introductions