What is the Climate Change Levy?

The Climate Change Levy (CCL), introduced in April 2001, is charged on business electricity, gas, and other taxable commodities used for lighting, heating, and power. It applies to businesses in the industrial, commercial, agricultural, and public sectors and is aimed at lowering greenhouse gas emissions. 

The CCL charge applies to: 

• Electricity 
• Natural gas 
• Petroleum and coal 
• Lignite and coke 
• Hydrocarbon gas in liquid form 

Road fuels and oils already subject to excise duty are exempt.  

CCL is just one of several policy tools used by the UK government to price carbon and encourage more efficient, lower‑carbon business energy use, alongside measures like the carbon price support rate and emissions trading schemes.

In this guide to the Climate Change Levy…

• The Climate Change Levy (CCL) is an environmental tax on UK business electricity, gas and certain solid fuels designed to encourage energy efficiency and lower emissions.
• Most commercial, industrial, agricultural and public sector organisations pay CCL on taxable energy use, but domestic users and charities for non‑business use are exempt.
• Climate Change Levy rates are set per unit of energy, reviewed each tax year by the government and added as a separate line on your business energy bill by your supplier.
• Energy‑intensive businesses that sign a Climate Change Agreement (CCA) can get large discounts on CCL, while small or low‑usage businesses may fall below the threshold or qualify for reduced VAT.
• Cutting your energy use with efficiency measures, smart meters and greener practices can lower both your business energy bills and the amount of Climate Change Levy you pay.

Who pays the Climate Change Levy? 

Not all energy users are subject to the climate levy charge. The CCL energy charge applies to businesses purchasing taxable commodities for operational use. However, exemptions exist for: 

• Domestic customers 
• Charities: For non-business energy use 
• Low-energy users: Businesses with minimal energy consumption 

Check with your energy supplier to confirm your liability for the levy. 

In practice, most VAT‑registered UK businesses that use electricity and gas above the “low usage” threshold will see CCL listed as a separate line on their energy bills.

If you believe your business should be exempt or on a reduced rate, you normally need to complete the relevant HMRC or supplier forms (such as PP10 or PP11 certificates) so your supplier can apply the correct treatment.

Do small and micro businesses pay CCL?

Many small and micro businesses across the UK do pay the Climate Change Levy, but very low users may fall below the usage thresholds or qualify for reduced VAT and no CCL charge.

If your monthly usage is under 1,000 kWh of electricity or 4,397 kWh of gas, you may qualify for 5% VAT and be exempt from paying CCL, but you should check your latest bill or speak to your supplier to be sure.

What if your business is based at home?

If you run a small business from home, your domestic energy supply will usually be treated as domestic use and won’t attract CCL, but switching to a business tariff or separate meter can change how VAT and CCL are applied.

Always tell your supplier how you use the premises so they can bill you correctly and help you understand whether climate change levy charges apply.

What are the current Climate Change Levy rates? 

The Climate Change Levy rates are calculated per kilowatt-hour (kWh) of energy consumed and are reviewed annually. 

The current rates are: 

• Electricity: 0.775 pence per kilowatt-hour (kWh) from April 1, 2024, to March 31, 2025  
• Natural gas: 0.775 pence per kWh from April 1, 2024, to March 31, 2025  
• LPG: 2.175 pence per kilogram (kg)  
• Any other taxable commodity: 3.174 pence per kg  

The CCL is a two-rate tax that is charged on energy used for lighting, heating, and power purposes. The amount a business pays depends on the amount of energy it uses.  

These CCL rates are part of a long-term government strategy to encourage energy conservation. Your supplier calculates the levy and adds it as a separate line item on your energy bill, passing the amount to HM Revenue & Customs. 

Main rate vs. carbon price support rate

The main rate of CCL applies to most UK business electricity and gas supplied by energy companies, while the separate Carbon Price Support (CPS) rate mainly affects electricity generators that use fossil fuels.

As a typical small or medium‑sized business, you will usually only see the main CCL rate on your bills rather than the CPS rate, which is handled further up the energy supply chain.

How CCL appears on your business energy bill

On a typical business energy bill, CCL is listed as a separate charge below your unit rates and standing charges, often labelled “Climate Change Levy” or “CCL”, with the rate shown in pence per kWh or per kg.

Comparing bills from different suppliers can help you understand how much of your overall energy spend is made up of wholesale costs, network charges, VAT and the Climate Change Levy.

Can you reduce your Climate Change Levy payments? 

The Climate Change Levy is based on your energy usage. Reducing your consumption will lower your levy payments. Here are some strategies to minimize your CCL charge: 

1. Sign a Climate Change Agreement (CCA) 

Businesses in energy-intensive industries can sign a Climate Change Agreement, committing to specific energy efficiency improvements in exchange for up to a 90% reduction in the CCL charge. 

CCAs are voluntary agreements between energy‑intensive sectors and the Environment Agency that set binding energy or carbon reduction targets in return for discounted CCL rates.
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Reductions can be significant, with eligible businesses currently able to claim around 92% off the CCL rate for electricity and 86% off gas when they meet their agreed targets.

2. Improve energy efficiency 

Small changes can make a big difference in reducing energy consumption and lowering your climate levy charge: 

• Optimise heating and cooling: Don’t heat or cool unoccupied spaces, and ensure systems are off during non-working hours. 
• Install light sensors: Automating lighting can cut energy waste by up to 30%. 
• Turn off equipment: Encourage employees to switch off computers and other devices overnight to avoid standby energy consumption. 
• Adjust thermostats: Lowering the temperature by just one degree can significantly reduce energy usage. 

For many UK SMEs, combining basic efficiency measures with an energy management plan can reduce overall energy consumption by 10–20%, which also cuts the CCL you pay because it is directly linked to units of energy used.

Other ways to manage CCL costs

If your business operates across multiple sites, you may be able to consolidate contracts, review meter types and ensure all eligible meters are correctly registered for any reliefs to avoid overpaying CCL.

It is also worth checking that historic bills have applied the right CCL rate and VAT treatment, especially if your usage pattern or business activities have changed, as you may be able to correct errors with your supplier.

Practical steps to make your business energy efficient 

Enhancing your energy efficiency benefits the environment, improves your public image, and reduces your energy bills and climate levy charges. 

Monitor energy usage 

Installing a smart meter provides real-time insights into your energy consumption, helping you identify and address inefficiencies. 

Half‑hourly data and smart meter reporting make it easier to spot wastage, benchmark different sites and track whether changes you make are actually reducing your consumption and your CCL costs over time. For more information on half-hourly metering, check out our guide to Market-Wide Half-Hourly Settlement (MHHS).

Upgrade to energy-efficient lighting 

Switch to LED lighting, which lasts longer and consumes significantly less energy. This can reduce lighting costs by up to 75%. 

In offices, shops, restaurants and warehouses across the UK, LED upgrades are often one of the quickest and simplest projects to improve energy efficiency and reduce both bills and levy‑linked costs.

Conduct an energy audit

An energy audit highlights areas where your business can cut energy use. Your energy supplier or a consultant can help arrange this. 

A professional audit will typically review your building fabric, heating and cooling systems, lighting, controls and operational patterns, then suggest a prioritised action plan with estimated savings.
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Even a simple walk‑through audit conducted internally can uncover obvious issues such as unnecessary overnight baseload, outdated equipment or poorly controlled heating in different areas of your site.

Stick to sustainable practices 

While renewable energy is no longer exempt from the Climate Change Levy, adopting sustainable practices and green tariffs demonstrates your commitment to reducing environmental impact. 

Using less energy, switching to lower‑carbon technologies and engaging staff in sustainability initiatives can still help you cut emissions and show customers, investors and regulators that your business is taking climate change seriously.

Over time, combining energy efficiency with on‑site generation, flexible tariffs and smart controls can help your business manage wider policy costs, including CCL and other environmental charges, more effectively.

The Climate Change Levy is an essential tool for encouraging businesses to prioritize energy efficiency and lower their carbon footprint. Understanding what the Climate Change Levy is, who pays the Climate Change Levy, and how to reduce its impact ensures your business is prepared to manage these costs effectively. 

If you want to cut your business energy bills, it’s a good idea to compare quotes and fix your rates. Click the "Compare tariffs today" button to start your business energy comparison. 

You can also use our business energy guides to understand other charges on your bill, such as VAT, standing charges and the nuclear RAB levy, and to explore ways to make your premises more energy efficient.

FAQs about the Climate Change Levy for UK businesses

Want some quick-fire answers to the most frequently asked questions on the Climate Change Levy? Our FAQs have got you covered.

What is the Climate Change Levy for UK businesses?

The Climate Change Levy is an environmental tax added to UK business energy bills for electricity, gas and certain solid fuels to encourage companies to use less energy and cut carbon emissions.

Do all UK small businesses have to pay the Climate Change Levy?

Most VAT‑registered small businesses that use taxable energy above the low‑usage threshold pay CCL, but very low users and some charities can be exempt.

How can my UK business see if we are paying the Climate Change Levy?

Check the latest business energy bill from your supplier for a separate line labelled “Climate Change Levy” or “CCL”, showing the rate and total charge.

Can my UK business get a discount on Climate Change Levy charges?

Energy‑intensive businesses that sign a Climate Change Agreement can receive large discounts on CCL rates if they meet agreed energy efficiency targets.

Does switching to a renewable business energy tariff remove the Climate Change Levy?

Renewable and green tariffs no longer give automatic exemption from CCL, so most UK businesses still pay the levy even if they choose cleaner energy.

How does the Climate Change Levy affect VAT on UK business energy bills?

If your UK business qualifies for 5% VAT and meets the low‑usage rules, you usually will not pay the Climate Change Levy on your business electricity or gas.

What happens if my UK business does not register or pay the Climate Change Levy?

Businesses that should register or pay CCL but fail to do so can face penalties and backdated charges from HMRC, so it is important to get billed correctly.

How can UK businesses reduce how much Climate Change Levy they pay?

Reducing energy consumption with efficiency upgrades, smart meters, better controls and behaviour change will cut both your business energy costs and the CCL you pay.