Climate Change Levy Explained: 2026 Rates, Exemptions and How to Pay Less

The Climate Change Levy (CCL) is a government environmental tax added to every standard-rated business energy bill in the UK — and one of the least-checked lines on the invoice. Most businesses pay it without question; many don’t realise that low-usage sites, charities and certain sectors are excluded entirely, or that energy-intensive businesses can cut it by up to 92% through a Climate Change Agreement. This guide explains what the CCL is, the 2026 rates, who’s exempt, and how to stop paying it if you shouldn’t be.

The CCL appears as its own line on your bill, charged per kilowatt-hour on top of your unit rate, then VAT is applied to the lot. It’s collected by your supplier and passed to HMRC. Because it scales directly with consumption, it quietly grows with your usage — and because it sits in the small print between the standing charge and the VAT line, it rarely gets the scrutiny the unit rate does.

What is the Climate Change Levy?

Introduced in 2001, the CCL is designed to incentivise business energy efficiency. It applies to electricity, gas and solid fuels supplied to businesses and the public sector for “lighting, heating and power” purposes. It does not apply to road fuel (which has its own duties) or to supplies that qualify as domestic.

Two practical points follow from the design:

• It’s a per-unit tax: every kWh you cut from consumption cuts the levy with it — on top of the unit-rate saving.
• It’s tied to your VAT treatment: supplies that qualify for the reduced 5% VAT rate are automatically excluded from CCL. The two reliefs travel together, which makes checking your VAT status doubly valuable — see our VAT on business energy guide.

CCL rates in 2026

The main CCL rates from 1 April 2024 (unchanged through 2025–26) are:

• Electricity: 0.775p per kWh
• Gas: 0.775p per kWh
• LPG: 2.175p per kg
• Other taxable commodities (e.g. coal): 6.064p per kg

Fractions of a penny sound trivial until you multiply them. A medium business using 50,000 kWh of electricity and 150,000 kWh of gas a year pays roughly £1,550 of CCL annually — before VAT is added on top of it. For genuinely energy-intensive sites the levy runs to five figures.

Who doesn’t pay the CCL?

You should not be paying CCL if any of these apply to a supply:

• Low usage (de minimis). Supplies averaging no more than 33 kWh/day of electricity or 145 kWh/day of gas are treated as domestic — 5% VAT and no CCL. Many micro businesses and small satellite sites qualify.
• Domestic or mostly-domestic use. If 60%+ of a supply is for domestic purposes (care homes, accommodation businesses, the flat above the shop on the same meter), the whole supply is excluded.
• Charitable non-business use. Charities’ non-business activities are excluded on the same basis.
• Certain uses of energy — e.g. energy used in some forms of transport, mineralogical and metallurgical processes, and electricity generation itself.

As with VAT, the supplier applies the standard treatment by default. If you qualify for exclusion, you claim it with the same VAT/CCL declaration form (PP11 supplier certificate for relief schemes, or the supplier’s VAT declaration for domestic/charitable/de minimis status) — and you can reclaim overpaid levy retrospectively, typically up to four years.

Climate Change Agreements — up to 92% off for energy-intensive sectors

If your business operates in an energy-intensive industry — manufacturing, food processing, horticulture, data centres, foundries, plastics, textiles and dozens of other eligible sectors — you may be able to enter a Climate Change Agreement (CCA) through your sector association. In exchange for committing to energy-efficiency or emissions targets, CCA holders receive a CCL discount of:

• 92% on electricity
• 89% on gas (and equivalent reductions on LPG and other fuels)

The CCA scheme has been extended to run to 2033, with windows for new entrants administered via sector associations and the Environment Agency. For an eligible factory spending six figures on energy, a CCA is worth serious money — if you’re in a qualifying sector and don’t hold one, ask your trade association about the entry process. Once agreed, you give your supplier a PP11 certificate and the discount is applied at billing.

CCL on renewable energy — the part people get wrong

A persistent myth says “green electricity is CCL-exempt”. That was once true — but the renewable electricity exemption was removed in 2015. Today, REGO-backed renewable tariffs still attract the full CCL. The exceptions are narrow: electricity you generate and consume yourself (e.g. rooftop solar behind the meter) isn’t a taxable supply, and certain combined heat and power arrangements have their own treatment. So while green tariffs are worth having for ESG reasons — see our tariff types guide — don’t choose one expecting a tax saving.

Four ways to legitimately cut your CCL bill

• Check your exclusion status. De minimis, domestic-mix and charitable rules remove the levy entirely on qualifying supplies — and refunds go back up to four years.
• Audit multi-site portfolios meter by meter. Even if HQ clearly pays CCL, small sites under the daily thresholds shouldn’t be.
• Pursue a CCA if you’re in an eligible sector. Up to 92% off the levy for meeting efficiency targets you may be working toward anyway.
• Reduce consumption. Unfashionable but unbeatable: every kWh saved avoids the unit rate, the CCL and the VAT on both. LED lighting, heating controls and compressor/refrigeration maintenance routinely cut 10–20% of usage in older premises.

And since the CCL is only ever a fraction of the bill, make sure the big numbers are right too: if you’re on out-of-contract rates the levy is a rounding error next to what you’re losing on the unit rate — check our deemed rates guide, then get a free whole-market quote. We flag VAT and CCL anomalies as part of every comparison we run, and our main business energy guide shows where your rates should be sitting in 2026.

Frequently asked questions

How much is the Climate Change Levy in 2026?

The main rates are 0.775p per kWh on both electricity and gas (2.175p/kg LPG). The levy appears as a separate line on your bill and VAT is charged on top of it.

Do small businesses pay the Climate Change Levy?

Only above the de minimis thresholds. Supplies averaging no more than 33 kWh/day of electricity or 145 kWh/day of gas are treated as domestic — no CCL and 5% VAT. Many micro businesses qualify without realising.

Is renewable electricity exempt from the CCL?

No — the renewable exemption ended in 2015. REGO-backed green tariffs attract the full levy. Self-generated electricity consumed on site (like rooftop solar) is outside the levy’s scope.

What is a Climate Change Agreement?

A voluntary agreement, entered through sector associations, where energy-intensive businesses commit to efficiency targets in exchange for a CCL discount of 92% on electricity and 89% on gas. The scheme runs to 2033.

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