Climate Change Levy: rates, exemptions and discounts

The Climate Change Levy (CCL) appears on almost every business energy bill, usually as a small line near the VAT. It is small per unit but adds up for larger users, and some businesses are paying it when they don’t need to. This guide explains the rates, who pays, the exemptions and the discounts available.

What is the Climate Change Levy?

The Climate Change Levy is an environmental tax on the energy businesses use, charged per kWh and added to your bill by your energy supplier. It applies to electricity, gas, liquefied petroleum gas (LPG) and solid fuels such as coal.

There are two parts to the levy:

• Main rates, paid by businesses in the industrial, commercial, agricultural and public services sectors. This is the CCL you see on your bill.
• Carbon price support rates, paid by owners of electricity generating stations and operators of combined heat and power (CHP) stations, not by energy customers directly.

Suppliers of taxable energy must register with HMRC, charge the levy to business customers and include it on their invoices.

What are the Climate Change Levy rates?

From 1 April 2026 the main rate is 0.801p per kWh for both electricity and gas. HMRC has already announced the rate from 1 April 2027.

Taxable commodity	From 1 April 2025	From 1 April 2026	From 1 April 2027
Electricity	0.775p per kWh	0.801p per kWh	0.827p per kWh
Gas	0.775p per kWh	0.801p per kWh	0.827p per kWh
LPG	2.175p per kg	2.175p per kg	2.175p per kg
Other taxable commodities (such as coal)	6.064p per kg	6.264p per kg	6.468p per kg

HMRC publishes the rates in pounds (for example £0.00801 per kWh). We have converted them to pence.

Example (illustrative figures): a business that uses 20,000 kWh of electricity and 30,000 kWh of gas in a year at the 2026/27 rate pays 50,000 × 0.801p = £400.50 in CCL, before VAT.

Rates normally change on 1 April each year, so check the rate on your bills after each April.

Who pays the Climate Change Levy?

Businesses and public bodies pay CCL on the electricity and gas they use, through their supplier. Suppliers must charge it where the customer’s business is in the industrial, commercial, agricultural or public administration sectors.

You don’t normally deal with HMRC yourself. The exception is if you produce taxable energy and use it in your own business (a “self-supply”), in which case you may need to register.

Who is exempt from the Climate Change Levy?

HMRC splits relief into supplies that are excluded from the levy and supplies that are exempt from the main rates.

Excluded supplies

• Domestic use. This includes homes, caravans, children’s homes, hospices, houseboats and supplies to community heating schemes.
• Charity non-business use. Energy a charity uses for its non-business activities is excluded. Business activities by a charity are still taxable.
• Small quantities (de minimis). These are treated as domestic use without a certificate:
  • metered electricity of no more than 1,000 kWh a month
  • piped gas of no more than 4,397 kWh a month per customer
  • coal or coke of no more than one tonne
  • LPG in cylinders each under 50 kg, or bulk LPG where the tank holds no more than 2 tonnes

Mixed use: the 60% rule

Where a premises is used partly for domestic or charity non-business use, HMRC applies the VAT qualifying-use rules. If that use is at least 60% of the total, the whole supply is not subject to the main rate of CCL. If it is less than 60%, CCL is charged on the part that doesn’t qualify.

Exempt supplies

The main exemptions cover energy that is:

• not burned or used in the UK (exports)
• used in some forms of transport, such as electricity for train line electrification
• not used as fuel, for example electricity used in electrolytic processes
• used in metallurgical and mineralogical processes
• supplied to electricity producers and some combined heat and power stations, or supplied by small generating stations, in certain circumstances

Most of these exemptions affect industrial users. For a typical office, shop or restaurant, the relevant reliefs are the domestic, charity and de minimis exclusions.

How do you claim a CCL exclusion or exemption?

• De minimis supplies: no certificate is needed. Your supplier treats them as excluded.
• Domestic or charity non-business use: give your supplier a VAT certificate. It is the same certificate you use to get the reduced rate of VAT, so one form covers both. See our VAT on business energy guide.
• Other exemptions: send your supplier a Climate Change Levy supplier certificate (form PP11). Suppliers must accept paper PP11 certificates and process correctly completed ones within 5 working days of receiving them.

What is a Climate Change Agreement?

A Climate Change Agreement (CCA) is a voluntary agreement between UK industry and the Environment Agency to reduce energy use and carbon emissions, in return for a large discount on CCL. The Environment Agency runs the scheme for the whole of the UK.

CCAs are open to a wide range of sectors, from energy-intensive processes such as chemicals and paper to supermarkets and agricultural businesses. Operators apply through their sector association.

How big is the CCA discount?

Commodity	Discount on main rate (2025, 2026 and 2027)
Electricity	92%
Gas	89%
LPG	77%
Other taxable commodities	89%

Applied to the 2026/27 main rate of 0.801p, a 92% discount leaves electricity at about 0.064p per kWh and an 89% discount leaves gas at about 0.088p per kWh. These are our calculations from HMRC’s published rates and percentages.

The current CCA scheme

New regulations made in July 2025 came into force on 1 January 2026. They set three new target periods (2026, 2027 to 2028, and 2029 to 2030), move to facility-level targets, and extend CCL relief to the end of the final certification period on 31 March 2033. If a facility misses its target, the regulations set how buy-out fees are calculated.

How does CCL appear on your bill?

CCL is normally shown as a separate line, calculated as the kWh you used multiplied by the CCL rate. GOV.UK notes that the main rates are listed on your business’s energy bill.

Things to check:

• The rate matches the one in force for the billing period.
• The kWh matches your usage for the same period.
• Low-usage sites (no more than 1,000 kWh of electricity or 4,397 kWh of gas a month) should not be charged CCL.
• Charities and mixed-use premises that have given the supplier a certificate should see CCL removed or reduced.

Our guide on how to read a business energy bill shows where CCL sits alongside the unit rate and standing charge.

Do you pay CCL on renewable electricity?

Yes. Renewable electricity bought from a supplier is not exempt from CCL. The exemption for renewable electricity was removed for electricity generated on or after 1 August 2015.

Before then, renewable generators received Levy Exemption Certificates (LECs), which suppliers used to show that electricity was exempt. Transitional arrangements let suppliers use LECs for renewable electricity generated before 1 August 2015 and supplied up to 31 March 2018. Ofgem confirms that the CCL exemption schemes for renewables and CHP are now closed.

So a green or renewable tariff does not remove CCL from your bill. Energy you generate and use yourself is treated differently: HMRC says that where you are an auto-generator or exempt unlicensed supplier, there is no requirement to account for CCL on self or direct supplies of renewable source electricity. See our renewable business energy guide for more on green tariffs.

Frequently asked questions