Have you budgeted for Climate Change Levy increases?

From 1 April next year the Climate Change Levy (CCL) applied to all business electricity, gas and solid fuel use is increasing significantly. This is primarily to offset the loss in revenue that the government will suffer as the CRC scheme comes to an end next year. However, for those who have never been part of CRC (and possibly for those who are) this change may have gone slightly under the radar, but the details are worth a look, especially when forecasting your energy budgets for next year.

The table below shows the current rate and new rate from 2019, as well as the percentage difference from 2018 to 2019.

Taxable CommodityRate from 1 April 2018Rate from 1 April 2019Change %
Electricity (£ per kilowatt hour (KWh))0.005830.0084745%
Gas (£ per KWh)0.002030.0033967%
Petroleum gas or other gaseous hydrocarbon in a liquid state (£ per kilogram (kg))0.013040.0217567%
Coal and lignite; coke and semi-coke of coal or lignite; petroleum coke (£ per kg)0.015910.0265367%

Source: www.gov.uk/guidance/register-for-climate-change-levy/

Forward planning

For most organisations the primary factors in judging the energy budget for the forthcoming year are price fluctuation and expected changes in energy consumption. However, this year the new changes in CCL must also be taken into account in order get an accurate picture of costs from April 2019 onwards.
It is worth noting that there are exemptions and reduced rates for CCL where certain criteria apply. Electricity generated either from renewable sources or some Good Quality CHP units (based on the CHPQA programme and relevant CCL exemption certificate) is exempt from the charge. In addition, organisations that participate in the Climate Change Agreement (CCA) Scheme are charged at a reduced rate – currently 90% for electricity and 65% for gas and solid fuels.

Tax increases and potential relief from these all contribute in the drive towards reducing energy consumption and adopting renewable energy options, as they add further weight to any business case.
Rates beyond 2019 are yet to be published. But, given the historical changes and the current policy environment of the Climate Change Act targets and associated carbon budgets, it seems inevitable that this policy lever will continue to be used. It also seems likely that, to continue to encourage reduced energy use and increase renewable energy generation, future rate changes will only go in one direction.
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