What is the Climate Change Levy (and Can You Avoid it?)

Have you ever looked at your energy bill and wondered what you’re paying for?

If you’re a commercial or industrial business, you may be charged an additional levy known as the Climate Change Levy, or CCL.

In this article, we’ll explain what the CCL is, how much it is, and why certain businesses have to pay it.

We’ll also look at how setting up a Climate Change Agreement can help you reduce the amount of Climate Change Levy you pay.

What is the Climate Change Levy (CCL)?

The CCL is an environmental levy placed on electricity, gas, and solid fuels for relevant businesses.

This levy is collected by the energy providers, who collect the levy through the energy bills they send out. This money is then passed to the government.

The aim of the CCL is to encourage businesses to become more sustainable and work towards the UK’s net zero targets – the less energy you use, the less CCL you pay.

Here are ten ways you can cut your business energy costs to get you started.

How Much is the CCL?

The CCL is set by the government and reviewed on an annual basis.

The current rates as of 1 April 2025 are:

• Gas: £0.00775 per kilowatt hour (kWh)
• Electricity: £0.00775 per kWh
• LPG:  £0.02175 per kWh

If you own a generating station or operate a combined heat and power station, you pay the carbon price support rate instead:

• Gas: £0.00331 per kWh
• Petroleum gas: £0.05280 per kg
• Coal and solid fossil fuels: £1.54790 per gigajoule (gj)

Who Has to Pay the CCL?

The following types of businesses have to pay the CCL:

• Industrial businesses
• Commercial businesses
• Agricultural businesses
• Public services

Are There Any Ways I Can Avoid Paying the CCL?

Some businesses are exempt from paying the CCL. These include:

• Businesses that use less than 12,000 kWhs of electricity and less than 52,765 kWh of gas a year (this is called the de minimis limit)
• Charities engaged in non-commercial activities (this means if you sell products to raise funds, you may still have to pay the CCL)
• Business premises employed partly for domestic or non-commercial charity use. If the domestic or charity use is at least 60% of the total use, the whole premise is exempt

Some fuel use is also exempt, for example, when used in some forms of transport or in metallurgical and mineralogical processes.

If you’re exempt, you may need to apply for an exemption with your energy provider, providing proof and supporting documentation if required.

If you’re eligible for the CCL, you may be able to reduce your costs substantially by agreeing to a Climate Change Agreement.

What is the Climate Change Agreement?

A Climate Change Agreement (CCA) is a voluntary agreement where you commit to reducing your carbon emissions. The eligibility criteria depend on the industry you’re in and can be found in Appendix A of the Climate Change Agreements Operations Manual.

If you meet the targets agreed, you receive a significant discount on your CCL. This discount can vary depending on the targets you agree to and the type of energy you use. For example, the maximum discount for electricity is 92%, while the maximum discount for gas is 89%.

How Do You Set Up a CCA?

To set up a CCA, you need to apply through your relevant sector association.

For example, if you work in the paper sector, you would apply through the Confederation of Paper Industries. You may need to be a member of the association to progress your application.

Your sector association will help you gather the relevant paperwork and submit an application to the Environment Agency. The Environment Agency will then review your application and determine whether you’re eligible for a CCA.

The annual fee for a CCA is £185 per individual site (‘facilities’) included in your agreement. This fee is collected by your sector association.

Once your CCA is set up, you must show proof of meeting your carbon emission targets to be eligible for the reduction.

The CCL Doesn’t Have to Be a Challenge

It’s always frustrating having to pay increased costs when you’re a business. However, the CCL is designed to help companies save energy and become more sustainable.

Plus, if you commit to a CCA, you can substantially reduce your CCL by committing to energy-saving targets.

If you need help navigating the CCL or setting up a CCA, we can help. We’ll check your eligibility, put you in touch with the right sector association, and recommend how you can adapt your business to save as much energy as possible.

Talk to our team to see how much you could save.