The UK Climate Change Levy (CCL) is a carbon tax that is added to electricity and fuel bills, and is paid by industrial, commercial, agricultural and public services for use of electricity, gas and solid fossil fuels (coal, lignite, coke and petroleum coke). Domestic energy users, charities and businesses that use small amounts of energy do not pay the Levy. Exemptions from the Levy are made for electricity that is generated from renewable sources, combined heat and power stations, and for certain energy intensive industries that have entered into Climate Change Agreements.
Climate Change Agreements (CCAs) are voluntary agreements made by UK industry and the Environment Agency to reduce energy use and carbon dioxide (CO2) emissions. In return, operators receive a discount on the CCL. The Environment Agency administers the CCA scheme on behalf of the whole of the UK.
For operators who hold a CCA, the CCL will be reduced by:
- 90% on electricity bills
- 65% on other fuels
CCAs are available for a wide range of industry sectors from major energy-intensive processes such as chemicals, paper and supermarkets to agricultural businesses such as intensive pig and poultry farming.
There are two types of CCAs – umbrella agreements and underlying agreements.
The Department of Energy and Climate Change and industry sectors negotiate umbrella agreements. Together they agree the energy efficiency targets for a sector – the sector commitment. The agreement is then held between the sector association and the Environment Agency; the administrator. Umbrella agreements also list the processes that are eligible for a CCA.
Operation of the CCL and CCAs is a reserved matter for the UK Government, however given its responsibilities for climate change, emissions reduction and for the economic development of business and industry, the Scottish Government takes a close interest in the operation of CCL and CCA policy, to ensure that it supports Scotland’s climate change and business objectives.
Climate Change Levy – UK Government guidance
Climate Change Agreements – UK Government guidance