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Climate Change Programme and Climate Change Levy

Climate Change Programme and Climate Change Levy

The United Kingdom’s Climate Change Programme was launched in November 2000 by the British government in response to its commitment agreed at the 1992 United Nations Conference on Environment and Development (UNCED). The 2000 programme was updated in March 2006 following a review launched in September 2004.

In 2008, the UK was the world’s 9th greatest producer of man-made carbon emissions, producing around 1.8% of the global total generated from fossil fuels.

The aims of the programme are not only to cut all greenhouse gas emissions by the agreed 12.5% from 1990 levels in the period 2008 to 2012 (the international Kyoto commitment), but to go beyond this by cutting carbon dioxide emissions by 20% from 1990 levels by 2010.

When the original programme was published in 2000, it confirmed that UK emissions were already forecast to be around 15% lower by 2010.

As of March 2006, government projections were in line with the official energy policy of the United Kingdom) so that, by 2010, the UK will have reduced its carbon dioxide emissions by about 15-18% below 1990 levels, thus missing the government’s internal target but achieving its Kyoto Protocol target, with a projected reduction of emissions from the basket of all greenhouse gases (including carbon dioxide) of about 23-25% from 1990 levels.

 

Climate Change Levy

The climate change levy (CCL) is a tax on energy delivered to non-domestic users in the United Kingdom. Its aim is to provide an incentive to increase energy efficiency and to reduce carbon emissions, however there have been ongoing calls to replace it with a proper carbon tax.

 

Scope and purpose

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 generated from new renewables and approved cogeneration schemes is not taxed. Electricity from nuclear is taxed even though it causes no direct carbon emissions.

Rates

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. In the 2006 budget it was announced that the levy would in future rise annually in line with inflation, starting from 1 April 2007[1]. With effect from 1 April 2013 the rates are

Electricity 0.524p per kWh
Mains Gas 0.182p per kWh
LPG 1.172p per kg
Any other “taxable commodity” 1.429p per kg

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

Revenue from the levy was offset by a 0.3% employers’ rate reduction in National Insurance. However, the 2002 Finance Act 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 but this is no longer the case.

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