The Climate Change Levy is a government tax added to business energy bills every month. For many businesses it’s simply a line item that gets paid without question, but a significant number of UK businesses are paying CCL on energy supplies where an exemption applies, and they don’t know it.

If you haven’t reviewed your CCL position recently, there’s a reasonable chance you’re overpaying. This guide explains what the Climate Change Levy is, who qualifies for an exemption or reduced rate, and what to do if you think you’re paying more than you should be.

What Is the Climate Change Levy?

The Climate Change Levy is an environmental tax charged on energy used for business purposes. It was introduced in April 2001 as part of the UK government’s strategy to improve energy efficiency and reduce carbon emissions from industry.

CCL applies to electricity, natural gas, and solid fuels used by businesses. It is collected by energy suppliers, who add it directly to commercial energy invoices. Domestic energy users,  households are not subject to CCL.

The current rates for 2025/26 are:

• Electricity: 0.775p per kWh

• Natural gas: 0.672p per kWh

• LPG: 1.147p per kg

• Other taxable commodities: 1.147p per kg

For a business consuming 200,000 kWh of electricity and 100,000 kWh of gas per year, the CCL cost alone exceeds £2,200 annually – before any other energy charges. For larger energy users, the figure is considerably higher.

Who Is Exempt from the Climate Change Levy?

Not all business energy use attracts CCL. HMRC recognises several categories of supply that are exempt from the levy:

Domestic-use supplies – Energy supplied to dwellings (including care homes, halls of residence, and other residential accommodation) is exempt from CCL regardless of who the bill is addressed to. Mixed-use properties may qualify for a partial exemption.

Charities using energy for non-business purposes – Charitable organisations can claim CCL exemption on energy used for qualifying non-business activities, such as welfare services. Energy used for commercial or trading activities by a charity does not qualify.

Very small users – Businesses that fall below the de minimis threshold are treated as domestic consumers and are not charged CCL. The threshold is currently 1,000 kWh of electricity or 4,397 kWh of gas in a month – so most businesses of any meaningful size will exceed this.

Electricity from qualifying renewable sources – Historically, electricity backed by Levy Exemption Certificates (LECs) from qualifying renewable generators was exempt. This scheme closed to new certificates in 2015, though the broader principle of renewable energy and CCL policy continues to evolve.

Combined Heat and Power (CHP) – Electricity generated by a qualifying Good Quality CHP scheme can attract a CCL exemption under specific conditions. This typically applies to businesses generating their own power on-site.

Climate Change Agreements – The Main Route to a Reduced Rate

For energy-intensive businesses that don’t qualify for a full exemption, the most widely available route to a significantly lower CCL rate is a Climate Change Agreement (CCA).

CCAs are voluntary agreements between eligible energy-intensive sectors and the Environment Agency. In exchange for committing to energy efficiency improvement targets, participating businesses receive a substantial discount on their CCL rate:

• Electricity: 92% discount on the standard rate

• Gas: 80% discount on the standard rate

The sectors covered include manufacturing, chemicals, ceramics, food and drink, paper, glass, and many others. Businesses don’t negotiate directly with government, they join the umbrella agreement run by their relevant sector association, which sets the targets and manages compliance.

To qualify for the CCA discount, a business must:

• Operate in an eligible sector

• Join the relevant sector association’s umbrella agreement

• Hold a valid CCA certificate (issued when energy efficiency targets are met)

• Provide the certificate to their energy supplier

The discount is only applied while a valid certificate is in place. Businesses that miss their targets may lose the discount until the next compliance period.

Which Sectors Are Covered by Climate Change Agreements?

Over 50 energy-intensive sectors currently have umbrella CCAs in place, managed by their relevant trade associations. Businesses in the following sectors should check whether they are eligible:

• Food and drink manufacturing, including bakeries, breweries, and chilled food producers

• Ceramics, glass, and brick manufacturing

• Paper, printing, and packaging

• Chemicals, pharmaceuticals, and coatings

• Metal casting, forging, and heat treatment

• Rubber, plastics, and composites

• Textiles, leather, and laundry

• Horticulture and commercial glasshouses

If your business operates in a manufacturing or processing sector and is not currently in a CCA, the first step is to contact your trade association to ask whether an umbrella agreement exists. Many eligible businesses have simply never been told the scheme applies to them.

The CCA programme was extended following the 2021 government review, with the current scheme running until at least 2025. Businesses that join can access the CCL discount immediately once their certificate is in place, and targets are set industry-wide so individual businesses do not negotiate directly with HMRC or the Environment Agency.

How to Claim a CCL Exemption or Reduced Rate

The process for applying an exemption or CCA discount to your energy bills is straightforward, but it requires action on your part, exemptions are not applied automatically.

Step 1: Identify which exemption applies. Review your business activities, energy use, and the nature of your premises to determine whether any exemption category fits your situation.

Step 2: Obtain the correct declaration form. HMRC provides a range of PP certificates for different exemption types, PP10 for domestic/charity use, PP11 for CCA participants, and others for specific situations. These are available from HMRC and from your energy supplier.

Step 3: Complete and submit the declaration to your supplier. Once your supplier holds the correct declaration, they will apply the appropriate CCL rate to future invoices.

Step 4: Keep certificates up to date. CCA certificates require renewal when energy efficiency targets are met in each compliance period. Domestic-use declarations should be reviewed if your business activities change.

Importantly, exemptions generally apply from the date the declaration is submitted, not retrospectively. Every month without the correct certificate in place is a month paying the full CCL rate unnecessarily.

What If You’ve Been Overpaying?

If you believe you have been charged CCL on supplies that should have been exempt, you can raise a formal query with your energy supplier. In some circumstances, suppliers can apply credits or adjustments for incorrectly charged CCL – but the rules are strict and backdating is limited.

For ongoing supplies where the exemption has never been claimed, the priority is to get the correct declaration in place and stop the overpayment going forward.

Recovery of historic overpayments is possible in some cases, but it requires the supplier’s cooperation and supporting documentation.

If you’re in this position, it’s worth taking advice before approaching your supplier – how you frame the query can affect the outcome.

CCL Across Multiple Sites and Supply Points

One area where businesses frequently pay more CCL than necessary is when they operate across multiple meters or more than one site.

CCL declarations apply at the individual supply point level, not across a business as a whole. If your CCA certificate or domestic-use declaration is registered against one meter only, other supply points on the same site, or at separate locations, will continue to attract the full CCL rate unless separate declarations are submitted for each.

This matters in several practical situations:

• Multiple electricity or gas meters on a single site, for example separate supplies to office space and a production area

• Sites acquired through growth or acquisition that were managed under a different energy account

• Changes in building use, such as converting part of a commercial premises to residential accommodation, which may create a new partial domestic-use exemption that was not previously available

Energy suppliers do not automatically extend declarations across all supplies for the same customer. If your energy portfolio has grown or changed since you last reviewed your CCL position, an audit of every supply point is the only reliable way to confirm the correct rate is being applied everywhere.

For multi-site businesses, this audit is often the single fastest route to a meaningful, ongoing cost reduction without any capital expenditure.

How Catalyst Can Help

Catalyst Commercial works with businesses across the UK on energy procurement and cost management, and that includes identifying where CCL exemptions or CCA discounts may apply. If you haven’t reviewed your CCL position recently, or if your business activities or premises have changed, it’s worth a check.

We can review your current invoices, advise on which exemption categories might apply, and help you put the right declarations in place with your supplier.

Speak to Catalyst about your CCL position →

Further reading: Climate Change Agreements: How to Cut Your CCL Bill by up to 92% sets out how qualifying sectors cut the levy by up to 92%, far beyond the standard exemptions.

Further reading: check the current CCL rates for 2026/27 to see exactly what the levy costs before any exemption or discount.