The Climate Change Levy (CCL): What does it mean for small businesses?

The climate crisis is a global issue, and governments worldwide are reacting by introducing green initiatives and programmes and urging businesses and citizens to reduce their carbon footprint. 

And to reduce our impact on the environment, the UK government introduced the Climate Change Levy over 20 years ago in a bid for businesses to reduce their energy consumption and become more sustainable.

But what exactly does this mean for small businesses? In this Bionic guide, we’ll walk you through everything you need to know about the Climate Change Levy and the simple changes your business can make to become more energy efficient.

Five-point summary on the Climate Change Levy

• The Climate Change Levy is an environmental tax that encourages businesses to have more sustainable practices. It's charged on energy usage - including lights, heating and anything that powers a business.
• Most businesses in the commercial, industrial, agricultural, and public services sectors pay CCL at the main rate, which from 1 April 2026 rises to £0.00801 per kWh for both electricity and gas.
• There are two different rates - the main rate and the carbon price support rate. Most businesses that are required to pay CCL will pay the main rate, and how much you pay depends on energy usage. The standard 20% VAT rate is also applied to CCL payments.
• Some businesses are exempt from paying CCL altogether, including those using very small amounts of energy, charities running non-commercial activities, and businesses on 100% certified renewable electricity tariffs.
• You could cut your CCL bill by entering a Climate Change Agreement, switching to a REGO-backed renewable electricity tariff, or making straightforward energy-efficiency improvements.

What is the Climate Change Levy (CCL)?

The Climate Change Levy (CCL) is a UK environmental tax charged on energy supplied to businesses and the public sector, including electricity, gas, LPG, and solid fuels. It is designed to drive energy efficiency and cut greenhouse gas emissions. Your energy supplier collects it on behalf of HMRC, and it appears as a separate line on your bill.

In theory, the more energy efficient your business is and the less carbon energy it uses, the lower CCL tax you’ll pay.

According to HMRC data, CCL tax receipts in the UK came to around £1.77 billion in 2024/25. This is down slightly from £1.83 billion the year before. That figure comes from the energy bills of businesses across the UK. So it's worth knowing exactly what you're paying, and whether you could pay less.

How is the Climate Change Levy charged?

The Climate Change Levy is charged on energy used for lighting, heating and power purposes such as electricity, petrol, natural gas and coal. 

Business energy suppliers are responsible for charging CCL, as they supply the taxable commodities. Once the energy supplier has collected this CCL charge, it’s then passed on to HMRC (HM Revenue & Customs).

CCL appears as a separate line on your energy bill. Your supplier multiplies the units you used in the billing period by the relevant CCL rate and shows the result clearly. This is usually labelled "Climate Change Levy" or "CCL". 

VAT is then applied to your total at the standard 20% rate, including the CCL amount. So the real-world cost of CCL is slightly higher than the headline rate alone suggests.

What are the current Climate Change Levy rates?

The CCL is split into two different rates — the main rate and the Carbon Price Support rate

Main rates

Any business that operates in the industrial, public services, agricultural or commercial sectors will be charged CCL at the main rate on electricity, solid fuel (such as coal) and gas. 

The amount of CCL your business pays will depend on how much energy you use, as you’re charged per kilowatt hour (kWh) for gas and electricity and per kilogram (kg) for other fuels. 

The current and confirmed upcoming main rates are:

^{Source: HMRC — gov.uk/guidance/climate-change-levy-rates, last updated November 2025.}

What does this mean in pounds and pence? 

At the current rate of £0.00775/kWh, a typical micro-business using 15,000 kWh of electricity a year pays around £116 in CCL on electricity, before VAT. A small business using 25,000 kWh of electricity pays around £194. 

From April 2026, those figures rise slightly as the rate moves to £0.00801/kWh.

Reduced rates for Climate Change Agreement holders

If your business holds a Climate Change Agreement (CCA), you pay a significantly lower CCL rate. Here are the percentage discounts that apply:

^{Source: HMRC — gov.uk/guidance/climate-change-levy-rates}

So, if your sector has a CCA and you're on electricity, you only pay 8% of the standard CCL rate. For high-energy-use businesses, that saving can be substantial. See the section below on how to apply for a CCA.

Carbon Price Support rate

The Carbon Price Support rate (CPS) is paid by owners of heat and power stations in a bid to reduce carbon emissions produced by businesses. 

Businesses that generate some or all of their own energy — such as solar power or wind turbines — and make money selling the excess power back to the grid are typically classed as small generators and are exempt from the CPS rate.

The CPS rate has been frozen since April 2016 and is confirmed to remain at these levels until 31 March 2028:

Who pays the CCL?

You’ll pay the main rate Climate Change Levy if your business operates within the following sectors:

• Industrial — These can be any businesses that make or sell machinery, equipment or supplies used in manufacturing and construction work. This includes factories, refineries and other large-scale production facilities. 
• Commercial — The commercial sector encompasses businesses involved in providing goods and services, excluding industrial and public sector activities. This includes offices, retail stores, hotels and restaurants.
• Public services — The public services sector consists of government departments, local authorities, schools, hospitals, and other organisations involved in providing public services.
• Agricultural — The agricultural sector involves activities related to farming, cultivation, and the production of crops and livestock. It includes farms, nurseries, fisheries, and other agricultural enterprises.

If you're not sure which sector your business falls into, Bionic's energy experts can help you work that out. Just get in touch, and we'll point you in the right direction.

Is VAT charged on the Climate Change Levy?

Yes, Value Added Tax (VAT) is charged on Climate Change Levy in the UK. 

The standard 20% VAT rate applies to all CCL payments unless the supply is exempt or a reduced VAT rate is in place. 

A business is exempt from VAT if they only sell VAT-exempt products — such as the selling, leasing and letting of commercial land and buildings, fundraising events by charities and more — or if they’re involved with taxable ‘business activities’. 

Because VAT is applied to your total bill, including the CCL element, the actual cost of CCL to your business is slightly higher than the headline per-unit rate. Most businesses pay VAT at 20%. But if your average daily use falls below 33kWh of electricity or 145kWh of gas, you could qualify for the reduced 5% VAT rate, and pay no CCL at all. Read our guide to VAT on business energy to find out more.

Who is exempt from the Climate Change Levy?

Certain businesses may be exempt from paying the main rate of CCL, including:

• Businesses that use a small amount of energy — less than 33kWh of electricity or 145kWh of gas per day (roughly 1,000kWh electricity or 4,397kWh gas per month). This is known as the "de minimis" threshold. If you fall below it, your supplier treats your supply as domestic. This means no CCL and a reduced 5% VAT rate.
• Domestic energy users, such as homes, self-catering holiday accommodations, and caravans.
• Charities that engage in non-commercial activities — that is, they don't sell products or services to raise funds, and rely solely on gifts and donations. 

Renewable electricity and CCL exemption

If your business uses electricity from a 100% certified renewable source, backed by Renewable Energy Guarantee of Origin (REGO) certificates, that electricity supply is exempt from CCL. 

This is one of the most straightforward ways for small businesses to cut their CCL bill, and many suppliers now offer REGO-backed green tariffs. When you compare energy with Bionic, our team can help you identify which tariffs qualify for this exemption. 

What happens if I think I’ve paid too much on the Climate Change Levy?

If you think that you’ve overpaid on the Climate Change Levy, then it’s possible to claim a tax credit. 

Head over to the Government website and fill out the form to claim a tax credit.

You may also be able to backdate a CCL exemption claim by up to four years. But you'll need HMRC's agreement and documentary evidence to support it. 

If your supplier charged you CCL when you should have been exempt, contact them first. If that doesn't resolve it, contact HMRC directly. Checking your energy bills regularly is a good habit. The CCL charge should always appear as its own line, making it easy to spot.

How can you make your business more energy efficient?

If you’re looking for easy ways in which you can reduce your business's carbon footprint — and save money, too — then there are a few ways you can go about it:

Do an energy audit

The best place to start is an energy audit. This involves a thorough look at how your business uses energy — either done yourself or by an outside specialist.

An audit can identify opportunities to save energy (and money!) that you might not have even considered.

To find out more about conducting an energy audit for your business, check out our guide.

Turn off equipment when not in use

It sounds obvious, but a huge amount of energy is wasted by leaving equipment running when it isn't needed. Switch off computers, lights, and machinery at the end of the day. Small habits add up to real savings.

Looking to be more energy efficient in your workspace? Our guide to business energy for offices has everything you need.

Switch to LED lighting

Traditional bulbs drain energy. Energy-efficient LED lighting can use up to 75% less electricity than old-style incandescent bulbs. LEDs last longer, consume less energy, and give you the same quality of light — or better.

Turn down the thermostat

Keeping thermostats a few degrees lower in winter, or a few degrees higher in summer, can make a noticeable difference to your bills. As a rough guide, offices should be around 20°C; warehouses work well at around 16°C.

You could also use programmable thermostats, which automatically adjust temperature based on the time of day.

Get a smart meter

A smart meter lets you see exactly how and when your business uses energy. It helps you spot patterns, identify energy-hungry equipment, and make smarter decisions about your energy use.

Discover more about getting a smart meter for your business with our guide.

Switch energy suppliers

At Bionic, we make switching energy suppliers simple. Every business is different. So we use smart data to find an energy deal that fits your needs.

To start a business energy comparison, just give us your postcode. Our tech-enabled experts will search our trusted panel of suppliers and find you a deal that works.

Get in touch with our team and make the switch today.

How can your business pay a reduced rate on the Climate Change Levy?

Businesses can reduce their CCL payments by entering into a Climate Change Agreement (CCA) with the Environment Agency.

A Climate Change Agreement (CCA) is a voluntary agreement between an energy-intensive business (or sector) and the Environment Agency. In exchange for meeting energy efficiency or CO2 reduction targets, businesses receive a significant discount on the CCL. This is currently 92% off the electricity rate and 89% off the gas rate. 

A new five-year CCA scheme opened on 1 January 2026 and runs until 2033. If your business uses a lot of energy and you're not already in a CCA, this is worth exploring

A CCA is a voluntary arrangement that sets targets for increasing energy efficiency and reducing CO2 emissions. In return for meeting those targets, your business receives a discount on CCL.

To apply for a CCA, your business must be part of an eligible sector — typically energy-intensive industries. If you're eligible, you'll need to contact your sector association and ask them to set up a CCA on your behalf.

Here are the basic steps:

1. Check your eligibility - Not all businesses can apply. Your sector must be covered by a CCA. Find the list of eligible sectors on the government's website.
2. Contact your sector association - If you're eligible, your sector association can walk you through the process and help with your application.
3. Set targets and make a plan - Together with your sector association, you'll agree on energy efficiency or CO2 reduction targets, and set out how you'll meet them.
4. Submit your application - Once your plan is in place, submit it to the Environment Agency. If accepted, your business will be in a CCA and start receiving the CCL discount.
5. Keep up with your targets - To keep the discount, you must meet the targets in your CCA. These are usually reviewed every two years.

Get your business set with Bionic

No matter the size of your business, even the smallest of changes can make a big difference.

If you need more help understanding business energy, head over to our energy guide pages for more information. Or, get in touch today with the Bionic team to discuss your business energy needs, including electricity and gas. 

Frequently asked questions about the Climate Change Levy

Here’s an at-a-glance guide to some of the most frequently asked questions about the Climate Change Levy:

What is the Climate Change Levy, and why do businesses pay it?

The Climate Change Levy (CCL) is a UK environmental tax charged on energy supplied to businesses and the public sector. It covers electricity, gas, LPG, and solid fuels. The UK government introduced it in April 2001 to push businesses to use energy more efficiently and cut carbon emissions. Your energy supplier charges it on your bill and passes it to HMRC.

What are the CCL rates for 2025 to 2026 and 2026 to 2027?

From 1 April 2025 to 31 March 2026, the main CCL rate is £0.00775 per kWh for both electricity and gas. From 1 April 2026, the rate rises to £0.00801 per kWh for both. LPG stays frozen at £0.02175 per kg. The latest rates are always available at gov.uk/guidance/climate-change-levy-rates.

Do small businesses have to pay the Climate Change Levy?

Most small businesses in the commercial, industrial, agricultural, and public services sectors do pay CCL. But if your average daily energy use falls below 33kWh of electricity or 145kWh of gas, you may be exempt. To check whether the de minimis threshold applies to your business, look at your recent bills or speak to your supplier.

Is the Climate Change Levy the same as VAT on energy?

No, they're two separate charges. CCL is a fixed environmental tax charged per unit of energy you use. VAT is a percentage tax applied on top of your entire bill, including the CCL element. Most businesses pay 20% VAT. Some low-usage businesses may qualify for a reduced 5% rate.

How can my business reduce its CCL payments?

There are three main options. First, apply for a Climate Change Agreement if your sector is eligible — this could cut your CCL on electricity by 92%. Second, switch to a 100% REGO-certified renewable electricity tariff, which is exempt from CCL. Third, reduce your overall energy consumption through efficiency measures, which means less taxable energy use. When you compare energy with Bionic, we can help you find a tariff that keeps your costs down.

What is a Climate Change Agreement and how does it work?

A Climate Change Agreement (CCA) is a voluntary deal between an energy-intensive business (or sector) and the Environment Agency. In exchange for committing to energy efficiency or carbon reduction targets, businesses receive a substantial CCL discount. This is currently 92% on electricity and 89% on gas. A new CCA scheme opened in January 2026 and runs until 2033. Check the government website to see if your sector is eligible.

Which businesses are exempt from the Climate Change Levy?

Three main groups are fully exempt: businesses using energy below the de minimis threshold (under 33 kWh of electricity or 145 kWh of gas per day), charities carrying out non-commercial activities, and domestic energy users. Additionally, businesses on 100% REGO-certified renewable electricity tariffs are exempt from CCL on that electricity supply.

Can I claim a refund if I've been overcharged for CCL?

Yes. If you think your supplier charged you CCL when you should have been exempt, contact them first. If that doesn't resolve it, you can claim a tax credit from HMRC using the CCL200X form, available at gov.uk. You may be able to backdate a CCL exemption claim by up to four years, subject to HMRC approval and evidence.