Businesses in the UK are ever more frequently feeling the pressure of rising energy costs, driven by global constraints on supply, inflationary pressure on energy prices and policy induced levies like carbon taxes. Among this plethora of growing expenses; one cost area often remains unnoticed: the climate change levy or CCL.
This environmental tax is applicable to the vast majority of non-domestic energy consumption in the UK. Usually only added as an adjustment on an energy bill, the small cost of CCL, when multiplied over the year, can become a sizable total cost – potentially thousands of pounds for a business.
CCL is vitally more than just another tax, it is also a lever. It incentivises energy efficiency, and de-incentivises no or low energy efficiency. And for those businesses clever enough to consider exemptions, reductions or ‘smart’ energy, they can diminish the CCL cost to a bare minimum or in some instances eliminate CCL costs altogether.
In this blog, we provide an explanation of CCL, who it applies to and how your business can move CCL from a cost burden to a cost savings – it includes practical examples and guidance from the experts at E for Energy.
What is the Climate Change Levy UK (CCL)?
The Climate Change Levy (CCL) is a tax introduced by the UK Government in 2001 and applies to energy used non-domestically. The aims of the CCL are:
1. Encourage businesses to be more energy efficient.
2. Reduce total greenhouse gas emissions from the commercial sector.
The CCL is charged by energy suppliers on the units of electricity, gas and other fuels used by businesses and non-domestic consumers to HM Revenue and Customs (HMRC).
The CCL has two rates:
1. Main CCL electricity rate
These apply to most commercial energy consumption and include:
• Electricity
• Natural gas
• LPG (liquid petroleum gas)
• Other solid fuels
Most businesses will see these rates on their energy bills.
2. Carbon Price Support (CPS) Rates
These apply to electricity generators who burn fossil fuels but not relevant to standard commercial consumers, in the context of UK’s wider carbon price framework.
If the business receives an energy bill from a supplier like EDF, British Gas or E.ON, they are most likely being charged the Main CCL electricity rate anyway (whether they are aware of this or not).
Current CCL Rates for 2025 – 26
The government announces the CCL rates as part of their annual fiscal budget. The CCL is based on the amount of usage, charging per kilowatt hours (kWh) or kilograms, depending upon the fuel.
As already noted, for the 2025 to 2026 financial year (April 2025 to March 2026), the CCL Main CCL electricity rates are:
• Electricity: £0.00775 per kWh
• Natural Gas: £0.00672 per kWh
• LPG: £0.02175 per kg
• Other taxable commodities (e.g., coal): £0.05267 per kg
It is important to note that while these values may seem small on a unit-by-unit basis, when multiplied by your usage, this can equal thousands of pounds per year.
Example Calculation:
: your business consumes 60,000 kWh of electricity per month:
• CCL charge = 60,000 x £0.00775 = £465 per month
• Annual then = £5,580
And that’s just electricity – gas tariffs add another unexpected charge to it all.
Who Has to Pay CCL and Who Doesn’t?
✅ You will incur CCL costs if:
• You are a business or a non-domestic consumer.
• You use more than 33 kWh of electricity or 145 kWh of gas each day.
• You are VAT registered (though some businesses that are not registered pay CCL depending on the supplier).
❌ You will not incur CCL costs if:
• You are a charity or non-profit using power only for non-commercial uses.
• You stay below the daily de minimis threshold.
• You buy your electricity from renewable or exempt sources.
• You have entered into a Climate Change Agreement (CCA).
• You generate electricity from a CHP plant that is eligible for exemption from CCL.
So knowing your eligibility status is key – there are many companies that pay this levy inappropriately because they are simply unaware.
Where is Your CCL energy bill?
The Climate Change Levy UK can frequently be found on commercial energy bills, typically included in the tax and levies section, although it should appear separately from:
• Standing Charges (the same fees, every day, irrespective of consumption),
• Unit Rates (price per kWh to actual consumption),
• VAT (usually at 20%).
It may appear as:
• “Climate Change Levy”
• “CCL Main Rate”
• or simply “CCL”
Clearly, it is not always easy to find, and businesses frequently miss it altogether, when packaged in energy management contracts or using aggregated billing. E for Energy’s experts undertake CCL energy bill audits for clients, and we regularly encounter businesses that have either overpaid CCL or have been inaccurately classified as liable for CCL.
Real-World Examples of CCL in Action
🏭 Example 1: Medium-Sized Food Manufacturer
• Average monthly energy consumption:
o Electricity: 45,000 kWh
o Gas: 30,000 kWh
• Average monthly CCL charges:
o Electricity: 45,000 x £0.00775 = £348.75
o Gas: 30,000 x £0.00672 = £201.60
o Total CCL of £550.35 per month
o Total annual CCL amount of £6,604.20
Result:
After a consultation with E for Energy, the business:
• Changed to a renewable electricity supplier
• Became partially exempt from CCL
• Reduced annual CCL burden by £3,800
🏨 Case 2: Independent Hotel with CHP
• Made an investment in a small-scale Combined Heat and Power (CHP) system.
• Was able to generate some electricity on-site and take a claim based on CCL exemption criteria.
• Monthly savings: ~£350 •
Annual savings: £4,200+ E for Energy supported the business in submitting the exemption application and ensuring compliance with HMRC expectations.
How to Reduce or Avoid CCL Charges
Here is the good news – CCL doesn’t need to stay a fixed cost on your accounts. There are different ways to reduce or potentially eliminate it altogether.
1. Apply for a Climate Change Agreement (CCA)
A CCA is a voluntary agreement between a business and the Environment Agency, offering significant discounts on CCL, in exchange for meeting energy efficiency, or reduced emissions targets.
• 92% discount on electricity CCL
• 83% discount on gas CCL
Eligible sectors included:
• Plastics
• Chemicals
• Paper
• Food & Drink Manufacturing
• Cold Storage, and much more
In order to find out whether you are eligible and apply, contact E for Energy.
2. Move to a Green Energy Tariff
If your supplier purchases electricity from a source of 100% renewable energy it could be CCL exempt. Be careful, not all Green tariffs are CCL exempt and you may still incur CCL charges from some suppliers.
E for Energy ensures that you’re connected to certified CCL exempt suppliers so you don’t incur unnecessary costs.
3. Invest in Energy Efficiency
The easiest measure to reduce your CCL is to consume less (CCL is charged per unit, after all). Some of the solutions for cut energy consumption include:
• Energy efficient lighting (e.g. LEDs)
• Motion sensors and timers
• Optimising HVAC
• Building energy management system (BEMS)
Not only will you reduce bills; you will also reduce your CCL liability.
Were you over-paying in the past?
E for Energy provides full CCL audits, in which we:
• Review your bills from 1-3 years
• Look for incorrect application of CCL
• Determine if you are eligible for refunds
• Submit claims back to the energy retailer
What E for Energy Can Do?
At E for Energy, we focus on optimising energy costs for out clients on a commercial level, not only supplier switching but also digging into billing formats, taxes, and baskets of levies and costs. We offer services such as:
• CCL audit and recovery
• CCA application and qualification
• Negotiating with suppliers for CCL exemption criteria and tariffs
• Energy consultancy for efficiency
• Continuous compliance management
We have delivered substantial savings for businesses across sectors, from hospitality to retail to manufacturing, through effective CCL management.
Conclusion
The Climate Change Levy UK is more than a tax – it is a cost that you can control, reduce or eliminate. Too many UK businesses take for granted that it is just a line on your cost sheet. With the right guidance and decisions, you can regain control. Ultimately, whether it is changing to a CCL-exempt supplier, going for a CCA or reducing your consumption, E for Energy is here to help.