The Climate Change Levy and What It Actually Costs Your Business

What the Climate Change Levy Is (and Isn’t)

The CCL is a government tax on energy delivered to non-domestic users. It applies to electricity and natural gas supplied through the grid. Your energy supplier collects it on behalf of HMRC and passes it through as a separate line item on your business energy bill. You don’t register for it separately or file anything. It just appears alongside your other charges.

The tax exists to encourage energy efficiency. The logic is straightforward enough. Make energy slightly more expensive and businesses invest in using less of it. Whether that’s worked as intended since its introduction in April 2001 is debatable, but the levy itself isn’t going anywhere. It was part of the UK’s original Climate Change Programme and remains a core piece of environmental tax policy.

One thing worth knowing: the CCL only applies to energy used for business purposes. Domestic use is exempt. That distinction matters if you run a business from residential premises or occupy a mixed-use building. It also means the levy doesn’t apply the same way to every sector. Care homes, for instance, may qualify for partial exemption on the residential portion of their supply. More on exemptions shortly.

The 2026/27 CCL Rates

The main CCL rates were frozen at £0.00775 per kWh for both electricity and gas from April 2024 through to March 2026. That two-year freeze ended this month. From 1 April 2026, the rates have increased in line with the Retail Price Index.

If you’re reviewing your business electricity or business gas costs, it’s worth knowing exactly where these rates have moved and where they’re heading next.

Main CCL Rates

That’s a 3.4% increase on both electricity and gas from the frozen 2024/25 rate. Not dramatic in isolation, but it compounds with every other line item that’s been creeping up. When you factor in the commodity cost, distribution charges, and other non-commodity charges on your energy bill, small percentage shifts add up across a full year.

What CCA Holders Pay

Businesses with a Climate Change Agreement pay a fraction of the main rate. The discount percentages haven’t changed for this period.

Rates sourced from GOV.UK Climate Change Levy rates and are correct at the time of writing (April 2026). Check the GOV.UK page for the latest published figures.

What That Looks Like on a Real Bill

A business using 50,000 kWh of electricity a year pays roughly £400 in CCL at the 2026/27 rate. A business using 200,000 kWh pays around £1,600. For gas-heavy operations like manufacturing or food processing, the combined electricity and gas CCL bill can run significantly higher. If you’re unsure where the CCL sits among your other charges, our business energy bill explained guide breaks down every line item.

Who Pays the CCL and Who Doesn’t

Most UK businesses pay the CCL. If you’re in the industrial, commercial, agricultural, or public service sector and you use energy for business purposes, the levy applies. It shows up on your bill whether you’re on a fixed contract, a variable deal, or sitting on out-of-contract deemed rates. If you’re unsure whether you’re on a deemed contract, that’s worth checking too, because the CCL is the same either way but your underlying unit rate might be far higher than it needs to be.

But not everyone pays the full amount. Several exemptions and reliefs exist.

The de minimis threshold. If your site uses very little energy, comparable to a domestic household, you fall below the de minimis threshold and the CCL doesn’t apply. For electricity, that’s 33 kWh per day (roughly 1,000 kWh per month). For gas, it’s 145 kWh per day. A small corner shop or a single-room office might qualify. Most trading businesses won’t.

Charity exemption. Charities using energy for non-business purposes are exempt. If the building is partly charitable and partly commercial, the exemption only covers the non-business portion. You’ll need a declaration form on file with your supplier, and clear records of how the space is used.

Domestic and residential use. Student accommodation, care homes, self-catering holiday lets, and the residential portion of mixed-use buildings are all exempt. If half your building is flats and half is commercial space, you should only be paying CCL on the commercial half. Getting the apportionment right can save a noticeable amount over time, particularly for landlords and property businesses with mixed portfolios.

Renewable energy sources. Electricity generated from qualifying renewable sources (solar, wind, hydro, biomass) and supplied under a Renewable Energy Guarantee of Origin (REGO) certificate is exempt from CCL. This applies to electricity purchased from a green energy supplier with valid REGO-backed tariffs, not just any tariff marketed as “green.” It also applies to electricity you generate on-site from renewables and use yourself.

Combined Heat and Power (CHP). Good-quality CHP schemes certified under the CHPQA programme can claim CCL exemption on the fuel inputs used for heat and power generation. If your business runs a CHP unit or buys heat and power from one, this relief could apply.

Excluded industrial processes. Energy used as a raw material rather than a fuel can fall outside the levy altogether. Chemical feedstock and electrolysis are the classic examples. These exclusions get technical quickly and tend to involve specialist advice.

Climate Change Agreements and the 92% Discount

For energy-intensive industries, the big lever is the Climate Change Agreement. These are voluntary deals between industry sectors and the Environment Agency. A business commits to hitting specific energy efficiency or carbon reduction targets. In return, it gets a substantial discount on the CCL.

The discount percentages for 2026/27 remain unchanged at 92% for electricity and 89% for gas. The effective per-kWh rates are in the CCA table above.

To see what that means in practice: a business using 200,000 kWh of electricity goes from paying £1,600 a year in CCL to roughly £128. That’s a meaningful saving, particularly for manufacturers and heavy process industries where energy is a significant cost line. Combined with a well-structured energy procurement strategy, the overall cost reduction can be substantial.

The sectors eligible for CCAs include chemicals, paper and pulp, food and drink manufacturing, ceramics, glass, and various types of heavy manufacturing. The government confirmed a new six-year CCA phase in February 2026, with targets running through to 2030 and reduced-rate certification available until March 2033. More detail is on the GOV.UK Climate Change Agreements page.

Performance gets assessed every two years, though. Miss your targets and you’re either paying a buy-out fee to stay in the scheme or losing the discount entirely for the next period. It keeps the system honest. Businesses approaching their target deadline should be actively tracking consumption data, not waiting for the assessment letter.

Checking Your Bill Is Right

The CCL should appear as a separate line item on your business energy invoice, usually labelled “CCL” or “Climate Change Levy.” If you qualify for an exemption or a CCA discount, that reduced rate should be reflected on the bill. But it doesn’t always happen automatically. If you’re not sure where to find it, our guide to reading your business energy bill shows you exactly which section to look at.

To claim a reduced rate, you need the right paperwork lodged with your supplier. For CCA participants, that means a PP11 certificate. For charities, it’s a declaration form. For de minimis or domestic exemptions, it’s typically a VAT declaration alongside evidence of low usage or residential status.

Start with the rate itself. Does it match the current published rate? Billing errors happen, particularly in the weeks after an April rate change when systems are being updated. Your MPAN number identifies your specific supply point, and the levy is applied at that meter level, so it’s worth checking each supply point individually if you have more than one.

Then check whether any exemption or reduced rate you’ve claimed is actually showing. Suppliers sometimes reset billing defaults during contract renewals or system migrations. A site that was correctly exempt six months ago might not be showing the exemption on the latest invoice. This is especially common during a change of tenancy or when switching to a new supplier.

And if your business has moved premises or changed how the building is used, your CCL status may need updating. The charge follows the nature of the supply, not the contract.

Reducing What You Owe

Beyond exemptions and agreements, the arithmetic is simple. The levy is charged per kWh. Use less, pay less.

Most businesses have already done the obvious things. LEDs, better heating controls, insulation. The next tier of reductions tends to involve on-site generation or getting more granular about when and where energy is being consumed.

Solar panels or other on-site renewables reduce the amount of electricity you buy from the grid, which directly reduces the amount subject to CCL. The specifics depend on how your metering and supply arrangements are set up, and it’s worth checking that your configuration is correct rather than assuming the savings flow through automatically.

Smart meters give you better visibility of real-time consumption, and for businesses with half-hourly metering under MHHS, the data gives you a clearer picture of when and where you’re using energy. Peaks and patterns become visible. That kind of visibility tends to surface savings that a monthly bill summary would never reveal.

Worth remembering that the CCL is a fixed charge per kWh. You can’t negotiate it away. But it sits on top of the commodity cost, so every penny saved on the underlying energy rate compounds with the levy rather than against it. Comparing business energy suppliers won’t touch the CCL line itself, but it pulls the overall number down. And if your current contract is nearing its end, timing your renewal correctly avoids rolling onto expensive deemed contract rates on top of the levy.

Keeping Records Clean

If you’re claiming any kind of exemption or reduced rate, documentation matters. HMRC can look back and request evidence, and suppliers need the right certificates to apply reduced rates.

Keep copies of any VAT declarations, PP10 or PP11 certificates, and letters of authority. If you operate a mixed-use building, keep a record of how you’ve split the usage between commercial and residential. Floor plans and occupancy details are useful if the split is ever questioned.

For businesses entering or already in a Climate Change Agreement, the monitoring and target-tracking paperwork is its own workstream. The two-yearly assessments require accurate consumption data matched to the agreed baseline and targets. Smart meter data and half-hourly settlement records can make this significantly easier to manage.

Not complicated. Just the kind of thing that slips if nobody’s actively looking at it.

Common Questions About the Climate Change Levy

Can I reclaim CCL? Not directly. The CCL isn’t recoverable through VAT returns in the way that VAT itself is. However, if you’ve been overcharged, say the wrong rate was applied or an exemption wasn’t reflected, you can request a credit from your supplier. The correction applies going forward and, in some cases, retrospectively.

Does the CCL apply to renewable energy? Electricity from qualifying renewable sources backed by a valid Renewable Energy Guarantee of Origin (REGO) certificate is exempt. That said, not every “green tariff” qualifies for the exemption. The REGO certificate has to be formally retired against your supply. Ask your supplier whether their green tariff carries the CCL exemption or just the marketing label.

What happens if I change supplier? Your CCL status transfers with the meter, but any exemption paperwork (PP11 certificates, declarations) needs to be re-lodged with the new supplier. It doesn’t carry over automatically. If you’re switching at the end of a contract, build this into the transition checklist.

Is the CCL the same across all suppliers? Yes. The rate is set by government and is the same regardless of which supplier you’re with. The difference between suppliers is the underlying commodity cost and standing charges, not the levy. That’s why comparing business energy deals focuses on the parts of the bill you can actually influence.

If you’re not sure whether your business is paying the right amount, or you want to explore whether a contract renewal could reduce your overall energy costs, get in touch and we’ll take a look. You can also browse our other business energy guides for more detail on specific topics.