Climate Change Levy

Introduced on 1 April 2001 under the Finance Act 2000, it was forecast to cut annual emissions by 2.5 million tonnes by 2010, and forms part of the UK's Climate Change Programme. The levy applies to most energy users, with the notable exceptions of those in the domestic and transport sectors. Electricity from nuclear is taxed even though it causes no direct carbon emissions. Originally electricity generated from new renewables and approved cogeneration schemes was not taxed, but the July 2015 Budget removed this exemption from 1 August 2015, raising £450m/year.[1]

From when it was introduced, the levy was frozen at 0.43p/kWh on electricity, 0.15p/kWh on coal and 0.15p/kWh on gas.

A reduction of up to 90% from the levy may be gained by energy-intensive users provided they sign a Climate Change Agreement.[2]

Revenue from the levy was offset by a 0.3% employers' rate reduction in National Insurance. However, the Finance Act 2002 subsequently increased that rate by 1%, reversing the reduction. The revenue used to fund a number of energy efficiency initiatives such as The Carbon Trust. However, revenue recycling was removed at the Spending Review 2010, with the revenue going to the Exchequer. [3]

In the 2006 budget it was announced that the levy would in future rise annually in line with inflation, starting from 1 April 2007.[4] In the 2018 Budget, it was announced that the rates of the Climate Change Levy would be adjusted until 2022 so that the gas rate reaches 60% of the electricity rate in 2021 to 2022. [5]

Rates have changed as tabulated below.

• Climate change in the United Kingdom
• Ecological tax reform
• Energy policy of the United Kingdom
• Energy use and conservation in the United Kingdom
• Renewables Obligation

• House of Commons Environmental Audit Select Committee (19 February 2008). "Reducing Carbon Emissions from UK Business: The role of the Climate Change Levy and Agreements". UK Parliament website. Retrieved 30 August 2009.
  • "Reducing Carbon Emissions from UK Business: The role of the Climate Change Levy and Agreements: Government Response to the Committee's Second Report of Session 2007–08". 20 May 2008. Retrieved 30 August 2009.
• Pearce, D. (2005). "The United Kingdom Climate Change Levy: A study in political economy" (PDF). OECD Environment Directorate, Centre for Tax Policy and Administration. Retrieved 21 January 2010.

• HMRC – Climate Change Levy in depth