News / What's the climate change levy?

What's the climate change levy?

12th April 2019

On 1 April 2019, the Climate Change Levy (CCL) - a tax on energy usage designed to encourage users to improve energy efficiency - increased. Applied to the bills of every UK business using energy, CCL helps to cut the country’s carbon dioxide (CO2) emissions.

Since its introduction in 2016, the levy has increased three times. The latest rise is the largest and most significant for electricity consumers, going from 0.00583 to 0.00847 pounds per kilowatt hour (£/KWh). This is a 45% increase on the previous rate and a significant rise compared to the original introductory rate of £0.00559/KWh.

So why has the government chosen to make such a big increase now?

Read more below:

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 will be submitted in July 2019, with final allowances being surrendered in October 2019. It would also simplify 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 decided that the best solution was to broaden the remit of the CCL. Not only was the CCL scheme already in place, but it also taxed users based on their usage: those organisations that consume more, contribute more. The downside is that now all businesses are exposed to the CCL increase – not just those that were previously registered under the CRC scheme.

Who’s affected?

CCL is a tax levied on UK businesses rather than individuals or domestic users. The only exceptions are businesses that qualify as ‘exempt’ because they consume energy that they've generated themselves from:

  1. Renewable sources, such as wind, solar and biomass
  2. Combined Heat and Power (CHP) sources – also known as co-generation, since it involves generating electricity and thermal energy in a single, integrated system
  3. Metallurgical and mineralogical processes

What can your business do to reduce its CCL commitment?

If your business is 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 your business to receive CCL discounts of up to 90%, while also improving your company’s sustainability credentials.

Committing your business to the consumption of renewable energy 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 you reduce your dependency on the Grid, plus your exposure to changes in the unit price of your electricity and to third party costs. What’s more, by selling any unused electricity back to the Grid, you could also create additional revenue streams.

To find out how Haven Power can help your business to more efficiently manage its energy, please use our contact form to get in touch.

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