The UK’s Green Agenda and the Climate Change Levy

The government has agreed to invest £166 million of funding to help innovators, businesses, academics and heavy industry. The investment will accelerate the delivery of the technologies needed to further drive Britain’s climate change ambitions.

The funding package will develop technologies in carbon capture, greenhouse gas removal and hydrogen, whilst also helping find solutions to decarbonise the UK’s polluting sectors.

The UK government offers many environmental tax and relief programmes to encourage firms to operate in a more ecologically responsible manner in response to the effects of climate change.

Green goals

There is little doubt that the growth in carbon footprint and greenhouse emissions over the last few decades has been extraordinary. Nonetheless, the government has increased its efforts to counteract this and make the United Kingdom as sustainable as possible. The government has decided to provide £166 million in financing to assist entrepreneurs, companies, universities, and heavy industry. The overall goal is that the investment will hasten the delivery of technology that will help Britain achieve its climate change goals.

The financing package will support the development of carbon capture, greenhouse gas removal, and hydrogen technologies, as well as the search for ways to decarbonise the UK’s polluting industries such as manufacturing, steel, electricity, and waste.

The funding includes:

  • £60 million to support and assist the development of low-carbon hydrogen in the UK, as well as to find and scale-up more efficient ways for producing clean hydrogen from water using energy.
  • £37.5 million to be invested in the UK’s largest government-funded greenhouse gas reduction initiative, ensuring the country’s position as a global leader in this field.
  • £20 million to be invested in supporting the development of next-generation carbon capture, utilisation, and storage (CCUS) technologies, with the goal of having them deployed at scale by 2030.
  • £20 million to be spent creating a new virtual Industrial Decarbonisation Research and Innovation Centre, which will speed up the decarbonisation of major energy-intensive industries that now contribute significantly to UK emissions.
  • The Industrial Energy Transformation Fund will invest £16.5 million exploring innovative technologies and procedures that will assist energy-intensive industries reduce their emissions while also lowering their energy prices.
  • £8 million for initiatives that assist the fast recovery and long-term viability of UK industry, such as reusing textile waste, developing innovative clay production processes for the ceramics sector, and concrete manufacture.

Climate Change Levy

The Climate Change Levy (CCL) is an environmental levy imposed on the energy consumed by enterprises that was first implemented in April 2001. The levy is intended to encourage businesses to be more energy efficient in their operations whilst also assisting in the reduction of total emissions.

The CCL is levied on ‘taxable commodities’ used for heating, lighting, and power by enterprises in the industrial, public services, commercial, and agricultural sectors. CCL is paid at one of two rates: the main rate or the carbon price support (CPS) rate, with the distinctions explained below:

  • Main rates: On electricity, gas, and solid fuel (e.g. coal, coke, lignite, or petroleum coke) usage, any firm in the industrial, public services, commercial, or agricultural sectors will be taxed CCL at the main rate. On your commercial gas or energy statement, you will see the CCL major prices. Charities engaging in non-commercial activities and companies consuming less than the de minimis amount are excluded from paying main CCL rates.
  • Carbon Price Support Rates: If you possess or operate generating stations or combined heat and power plants, you will be subject to the Carbon Price Support rate. The rate of levy varies depending on the commodity: kilowatt-hours for gas and electricity, and kilograms for all other taxable goods. However, because you’ll be classified as a small generator if you create your own energy and earn money through the Feed-in Tariff, you’re unlikely to have to pay the fee.
How is the Climate Change Levy charged?

Because they supply the taxable goods, business energy suppliers are responsible for charging the applicable CCL. The CCL fee is collected by the energy supplier and forwarded to HM Revenue & Customs.

Climate Change Levy Rates
Paying a reduced rate on CCL

Energy-intensive enterprises must engage into a Climate Change Agreement (CCA) with the Environment Agency to pay a lower main rate on CCL costs. A CCA is a voluntary agreement aimed at reducing energy consumption and CO2 emissions.

Undoubtedly, you will have to increase your company’s energy efficiency and reduce your average energy usage as a result of the trade-off. You will also have to track and report your company’s energy use and carbon dioxide emissions across four two-year periods. Companies that agree to the CCA connection will reduce their utility bill CCL rate by 90% and all other fuel costs by 65%. If your company achieves its goals at the end of each period, it will continue to receive climate change discounts.

Climate Change exemptions

There are exemptions which mean your commercial enterprise is not required to pay the Climate Change Levy. You must meet the following requirements:

  • Your commercial enterprise makes use of small quantities of power – much less than 33kWh power and/or 145kWh fuel line a day
  • You are a home power user, i.e. power is utilized in homes, schools, caravans and self-catering accommodation
  • You are a charity worried with non-business activities

Even if you are not exempt, you may be able to pay a lower rate if you make energy-saving modifications to your business. The easiest method to accomplish this is to sign the aforementioned Climate Change Agreement.

If you have overpaid your Climate Change Levy, you may be eligible for a tax credit through the HMRC gov website.

The Earthshot Prize

In October 2020, the Duke of Cambridge, Prince William alongside The Royal Foundation and prize judge, Sir David Attenborough, launched The Earthshot Prize.

The £50 million project was open to a wide range of individuals, teams or collaborations – scientists, activists, economists, community projects, leaders, governments, banks, businesses. The prize is open to anyone who can offer the solutions needed to fix our planets problems over the next critical ten year phase. Five £1 million prizes will be awarded each year for the next ten years, to each of the winners, providing the solutions to the world’s biggest environmental problems by 2030.

The Earthshot Prize focuses around five ‘Earthshots’, which are the goals for the planet. If these are achieved by the year 2030 it will provide a better future in the short term and for the generations ahead of us..

The five Earthshots are:

  1. Protect and restore nature
  2. Clean our air
  3. Revive our oceans
  4. Build a waste-free world
  5. Fix our climate

If you would like any further advice, please contact a member of our tax team on 01903 234094.