What’s the Climate Change Levy and how can I reduce it?
By Conor McArdle at Opus Energy
Whether you realise it or not, it’s likely that you’re paying the Climate Change Levy (CCL) as part of your business’ energy costs.
Brought into effect almost 20 years ago in 2001, the CCL is an environmental tax charged on the amount of electricity and energy your business uses. It’s designed to encourage organisations to minimise their energy usage and cut their carbon emissions – one of the cornerstones of the fight against climate change.
The CCL is particularly important to SME owners at the moment, as not only will you likely be under pressure to undertake cost cuttings across your business, but sustainability is also high on the agenda.
That’s why it’s important to understand the CCL and explore ways of reducing the cost it has on your business.
Firstly, who pays it?
The CCL applies to all those operating within the industrial, commercial, agricultural, and public services sectors.
Who’s exempt?
Domestic energy users are exempt from the Climate Change Levy, as are charities who use energy for non-business use or business customers who use very small quantities of energy. There are also exemptions for power that won’t be used in the UK and certain forms of transport.
Depending on your business classification, it may be useful to review the full list on the government website to see if you fall within any of these groups.
How is the CCL calculated?
CCL rates are calculated per kilowatt hour of usage. Your energy supplier will calculate it using the current rate and add it directly to your bill. You’ll be able to see this listed as a separate line item on your bill statement.
As the CCL is a tax, this cost doesn’t go to your supplier. It is transferred from your supplier directly to HM Revenue & Customs.
How do I save money?
There are a few different ways to reduce the amount of CCL you pay each time you get an energy bill.
The most efficient way is to keep your business energy consumption down. While this can be hard for a business, smart meters are a useful way of monitoring your energy usage, as the real time data they generate can provide useful insights into different behavioural patterns across your business.
Businesses using very small quantities of energy may also be exempt for the levy, and you may also qualify for a reduction in VAT, so this is worth checking with your supplier.
If your business is described as energy-intensive – which can be anything from supermarkets to pig and poultry farming businesses – can save money by applying for a Climate Change Agreement (CCA).
If you’re unsure about whether you’re eligible to sign up, you can find out by looking at Appendix A of the CCA operations manual. Those bound by a CCA will have to meet emission targets as agreed with their local authority, but can enjoy a discount on CCL charges of up to 90% for electricity and 65% for gas.
Further savings on energy costs
Business energy costs are usually accepted as a given, but you can reduce your overheads. From taking advantages of schemes like the CCA to investing in electricity generation infrastructure and becoming self-sufficient, or through improving energy efficiency, you can reduce your energy bills and contribute to the fight against climate change at the same time.
For more information and advice on reducing your energy costs and adopting more sustainable business practices, head to Brighter Business.
