If your business energy bill has ever made you pause and think, “Wait… what is this extra charge?”, you’re not alone. That mysterious line is often the Climate Change Levy (CCL), a UK government tax quietly added to every unit of energy your business uses. Most companies pay it without a second thought… but here’s the catch: understanding it properly can save you thousands each year.
In simple terms, the CCL is designed to make energy usage more expensive so businesses use less of it. It applies to electricity, gas, and certain fuels, and the more you consume, the more you pay. But it’s not just a fixed cost you have to accept. With the latest 2026 rate updates, available exemptions, and powerful discounts like Climate Change Agreements (which can cut your levy by up to 92%), there are real opportunities to reduce your bill legally and significantly.
This guide breaks everything down in plain English, what the CCL is, why it exists, who actually pays it, the updated 2026 rates, how it appears on your bill, and most importantly, the smart, practical ways to lower what you owe.
What Is the Climate Change Levy (CCL)?
The Climate Change Levy is a government tax on energy used by UK businesses and public sector organizations. It was introduced in April 2001, originally tied to the UK’s obligations under the Kyoto Protocol, and it works on a simple principle: make energy cost more, and businesses will use less of it.
It applies to electricity (charged per kWh), natural gas (per kWh), LPG (per kilogram), and solid fuels such as coal, coke, lignite, and petroleum coke (per kg or GJ). It does not apply to road fuels already subject to excise duty, and domestic energy users are completely excluded.
On your bill, the CCL appears as a clearly labeled separate line item, usually in the non-commodity or pass-through charges section. Your supplier collects it and passes it to HMRC.
Here’s a simple way to think about it: two factories using identical amounts of electricity both pay CCL on every kWh they consume. The one that wastes more energy pays more. That’s the levy working exactly as intended.
Why Does the CCL Exist?
It was designed as a financial nudge rather than a prohibition. Instead of banning certain energy uses outright, the government made high consumption more expensive, hoping businesses would respond by investing in efficiency and cleaner energy.
The goals were to help the UK meet international emissions targets, encourage investment in energy efficiency, promote renewable energy adoption, and generate revenue for wider government spending.
One thing worth knowing: CCL revenue doesn’t go into a ringfenced environmental fund. It flows into general treasury spending, which is why the levy has its critics. But for businesses, the practical question is how much you’re paying and whether you can legally reduce it.
Who Pays the Climate Change Levy?
The CCL applies to non-domestic energy use. That covers businesses across all sectors (commercial, industrial, agricultural, and manufacturing); public sector organisations including schools, hospitals, and local authorities; and charities carrying out commercial activities.
Domestic consumers pay no CCL at all. Energy used in homes, school dormitories, caravans, or self-catering accommodation is excluded.
If you’re liable for CCL, you’re required to register with HMRC. Failure to register carries a £250 penalty per instance. In practice, your supplier handles the collection, but the legal responsibility sits with you.
2026 Climate Change Levy Rates (Updated)
From 1 April 2026, CCL rates increased in line with inflation. Notably, electricity and gas rates are now fully aligned at the same per-kWh charge for the first time.
Main CCL Rates
| Taxable Commodity | Rate from 1 Apr 2024 | Rate from 1 Apr 2025 | Rate from 1 Apr 2026 | Rate from 1 Apr 2027 |
| Electricity (£/kWh) | £0.00775 | £0.00775 | £0.00801 | £0.00827 |
| Gas (£/kWh) | £0.00775 | £0.00775 | £0.00801 | £0.00827 |
| LPG (£/kg) | £0.02175 | £0.02175 | £0.02175 | £0.02175 |
| Other solid fuels (£/kg) | £0.06064 | £0.06064 | £0.06264 | £0.06468 |
Source: HMRC Climate Change Levy rates, last updated November 2025
In 2026, electricity and gas rates rose from 0.775p/kWh to 0.801p/kWh, an increase of roughly 3.4%. LPG remains unchanged. Solid fuel rates moved from £0.06064/kg to £0.06264/kg.
CCA Discount Rates
Businesses holding a Climate Change Agreement get substantial reductions on these rates:
| Taxable Commodity | Discount from 1 Apr 2026 |
| Electricity | 92% off main rate |
| Gas | 89% off main rate |
| LPG | 77% off main rate |
| Other solid fuels | 89% off main rate |
A business with a CCA effectively pays just £0.000641/kWh for electricity instead of the full rate. For high-energy users, that difference is enormous.
Carbon Price Support (CPS) Rates
The Carbon Price Support is a separate but related charge. Unlike the main CCL, it applies specifically to electricity generators and operators of combined heat and power (CHP) stations, not to typical business energy users directly. It does, however, feed into the cost of wholesale electricity, so it indirectly affects what everyone pays.
CPS Rates (Fixed until 31 March 2028)
| Commodity | Unit | Rate |
| Gas | £ per kWh | £0.00331 |
| LPG | £ per kg | £0.05280 |
| Coal and other solid fossil fuels | £ per GJ | £1.54790 |
How Much Does the Climate Change Levy Actually Cost?
Because CCL is a per-unit tax, your cost scales directly with how much energy you use. Using the current 2026 rate of £0.00801/kWh, here’s what that looks like across different business sizes.
Small office using 2,000 kWh/month in electricity: Monthly CCL: £16.02. Annual cost: approximately £192.
Restaurant or retail using 8,000 kWh/month combined: Monthly CCL: £64.08. Annual cost: approximately £769.
Manufacturing plant using 50,000 kWh/month: Monthly CCL: £400.50. Annual cost: approximately £4,806.
The same manufacturing plant with a CCA (92% electricity discount): Effective rate drops to £0.000641/kWh. Monthly CCL falls to just £32.04, saving around £4,400 per year.
For energy-intensive businesses, the difference between paying full CCL and holding a Climate Change Agreement can run to tens of thousands of pounds annually. It’s one of the most overlooked tax reliefs in UK business energy.
How to Calculate Your Climate Change Levy
The formula is straightforward: total kWh used, multiplied by the applicable CCL rate.
Say your business uses 5,000 kWh of electricity and 3,000 kWh of gas per month. At the 2026 rate:
Electricity CCL: 5,000 x £0.00801 = £40.05 Gas CCL: 3,000 x £0.00801 = £24.03 Total monthly CCL: £64.08
If you hold a CCA, apply the relevant discount factor to each fuel type before comparing against your actual bill.
To find your usage figures, check the kWh consumption section of your energy bill, use your supplier’s online account or smart meter app, or request a monthly data export if your bills arrive quarterly.
Where Does the CCL Appear on Your Energy Bill?
It sits as a separate line item in the non-commodity or pass-through charges section, distinct from your unit rate and standing charge. A typical commercial electricity bill might look like this:
| Charge | Amount |
| Electricity consumption (5,000 kWh @ £0.12/kWh) | £600.00 |
| Climate Change Levy (5,000 kWh @ £0.00801) | £40.05 |
| Standing charge (30 days @ £0.80/day) | £24.00 |
| VAT @ 20% | £132.81 |
| Total | £796.86 |
If you’re on a CCA reduced rate, your bill should show the discounted CCL figure. Many businesses assume the reduction is being applied when it isn’t. Check the line item and contact your supplier immediately if the full rate is still appearing.
Who Is Exempt from the Climate Change Levy?
There are three main categories of exemption, and it’s worth checking carefully whether your business qualifies.
1. Domestic and Household Use
Homes, private residential properties, and social housing are fully exempt. For mixed-use properties, such as a flat above a shop, if 60% or more of the energy consumed is residential, the entire supply qualifies as domestic and the CCL doesn’t apply.
2. Small Business Energy Users
Individual supplies are exempt if annual consumption falls below these thresholds: less than 33 kWh of electricity per day (around 12,045 kWh/year), or less than 145 kWh of gas per day (around 52,925 kWh/year). If you’re close to these thresholds, it’s worth tracking your usage and speaking to your supplier about applying for relief.
3. Charities for Non-Commercial Activities
Charities are exempt only when energy is used for non-commercial purposes, meaning activities funded by donations and grants rather than trading income. A charity running a commercial shop or café still pays CCL on energy used for those operations.
One connection that’s often missed: if your business qualifies for the reduced rate of VAT on energy (5% rather than 20%), you’ll also be exempt from CCL. The two reliefs are linked.
How to Claim CCL Exemption
Submit a PP11 form (the Climate Change Levy supplier certificate) to your energy supplier. Your supplier is legally required to receive this certificate before applying any relief. Find the form onGOV.UK.
Climate Change Agreements (CCAs): The Biggest CCL Discount
If there’s one thing energy-intensive businesses should understand about the CCL, it’s Climate Change Agreements. A CCA is a voluntary agreement between an eligible business and the UK Environment Agency. In exchange for committing to specific energy efficiency or emissions reduction targets, the business receives substantial discounts on its CCL liability.
According to the Environment Agency’s public register, 8,443 UK facilities currently hold a Climate Change Agreement.
How Much Can You Save?
| Energy Type | Standard CCL Rate (2026) | CCL with CCA | Saving |
| Electricity | £0.00801/kWh | £0.000641/kWh | 92% |
| Gas | £0.00801/kWh | £0.000881/kWh | 89% |
How It Works in Practice
You apply through an industry trade association, which is how most CCAs are accessed. You commit to measurable energy efficiency or emissions reduction targets over a defined period. The Environment Agency assesses and approves your agreement. Your supplier then applies the reduced rate directly to your bill.
Provided you meet your targets at each milestone, the discount continues. CCAs are most common in sectors including food and drink manufacturing, chemicals, ceramics, glass, paper, and textiles.
To check eligibility, contact your industry trade association or HMRC directly on 0300 200 3700. You can also find guidance on the Environment Agency’s CCA page.
CCL vs Carbon Price Support (CPS): Key Differences
These two are frequently confused. Here’s the short version.
| Climate Change Levy (CCL) | Carbon Price Support (CPS) | |
| Who pays | Business energy users | Electricity generators and CHP operators |
| What it targets | Energy consumption | Carbon-intensive power generation |
| How it appears on bills | Separate line item | Embedded in unit price |
| Rate type | Per kWh or kg consumed | Fixed rate per fuel type |
| Purpose | Incentivise efficiency | Make fossil-fuel generation more expensive |
In simple terms: CCL targets how much energy you use. CPS targets how that energy is produced. Both push the market toward lower-carbon outcomes, but from different directions.
CCL vs Other UK Business Energy Taxes
The CCL is one of several taxes and policy costs that appear on, or feed into, a business energy bill.
| Charge | What It Is | How It Appears |
| Climate Change Levy | Tax on non-domestic energy use | Separate line item (per kWh) |
| VAT | 5% or 20% on energy supply | Separate line item (% of total) |
| Carbon Price Support | Tax on fossil-fuel power generation | Embedded in unit rate |
| Renewables Obligation (RO) | Funds renewable electricity development | Embedded in unit rate |
| Contracts for Difference (CfD) | Supports low-carbon generation investment | Embedded in unit rate |
What makes the CCL different from all the others is that it responds directly to your consumption in real time. Every unit you save reduces your CCL cost immediately. That’s a level of direct control businesses don’t have over most other energy-related charges.
Legal Ways to Reduce Your Climate Change Levy
1. Reduce Energy Consumption
The most direct route. Since CCL is charged per kWh, every unit you avoid using cuts your levy bill immediately. Practical steps include switching to LED lighting (typically 60 to 80% less electricity than older systems), installing smart meters and monitoring systems to identify waste, using programmable thermostats, switching equipment off fully rather than leaving it on standby, and upgrading to energy-efficient industrial or commercial machinery.
2. Apply for a Climate Change Agreement
For eligible energy-intensive businesses, this is the most impactful option available. A CCA can reduce CCL by up to 92% on electricity and 89% on gas. Contact your industry trade association to find out whether a sector-wide agreement is available to you.
3. Switch to Qualifying Renewable Energy
Energy from certain qualifying renewable sources, including on-site solar generation and wind turbines consumed directly on-site, may be partially or fully exempt from CCL. Grid-supplied energy is not exempt even if you’re on a green tariff; it’s the source of generation, not the tariff label, that matters here.
4. Review Your Exemption Status
If you’re close to the small business thresholds (33 kWh/day electricity; 145 kWh/day gas), monitor your consumption carefully. If eligible, submit a PP11 form to your supplier.
5. Reclaim Overpaid CCL
If your exemption wasn’t applied correctly, or was applied late, you can reclaim overpaid CCL using the CCL200X postal form, available on GOV.UK. This is worth checking if you’ve recently become eligible for a CCA or exemption and aren’t sure when your supplier started applying it.
Frequently Asked Questions About the Climate Change Levy
What is the Climate Change Levy on a business energy bill?
It’s a UK government tax charged per kWh on electricity and gas used by businesses and public sector organisations. It appears as a separate line item on your bill, collected by your supplier and passed to HMRC.
Is the Climate Change Levy mandatory?
Yes, for all non-domestic energy users, including businesses, public sector bodies, and charities engaged in commercial activities, unless a specific exemption or reduced rate applies.
What are the current CCL rates for 2026?
From 1 April 2026, electricity and gas are both charged at £0.00801/kWh. LPG remains at £0.02175/kg. Other solid fuels are charged at £0.06264/kg.
What are the CCL rates for 2027?
From 1 April 2027, electricity and gas will rise to £0.00827/kWh. Solid fuels will rise to £0.06468/kg. LPG remains unchanged.
How do I know if I’m exempt from CCL?
You may qualify if your business uses less than 33 kWh of electricity or 145 kWh of gas per day, if you’re a domestic consumer, a charity operating non-commercially, or if your supply qualifies for the 5% reduced VAT rate. Submit a PP11 form to your supplier to apply.
How do I get a CCA discount?
Apply through your industry trade association, which typically manages sector-wide CCAs with the Environment Agency. You can also call HMRC on 0300 200 3700 to check eligibility.
What is the difference between CCL and CPS?
CCL is paid by energy users on the energy they consume. CPS is paid by electricity generators on the fuel they burn to produce electricity. CPS is built into your unit rate rather than showing as a separate charge.
Can I reclaim overpaid CCL?
Yes. If you’ve paid CCL when an exemption should have applied, use the CCL200X form from HMRC to reclaim it.
Does the Climate Change Levy apply to green or renewable energy tariffs?
Yes. CCL applies to all grid-supplied energy regardless of tariff type. The levy is based on how the supply is classified, not how it was generated. Energy you produce and consume on-site from qualifying renewables may be exempt.
Key Climate Change Levy Facts at a Glance
| Detail | Information |
| Introduced | April 2001 |
| Administered by | HMRC |
| Collected by | Energy suppliers |
| 2026 rate (electricity and gas) | £0.00801/kWh |
| 2027 rate (electricity and gas) | £0.00827/kWh |
| CCA electricity discount | 92% |
| CCA gas discount | 89% |
| Small business electricity threshold | Under 33 kWh/day |
| Small business gas threshold | Under 145 kWh/day |
| Exemption claim form | PP11 (submit to your supplier) |
| Penalty for non-registration | £250 per instance |
| Revenue destination | UK general treasury |
