Climate Change Levy
Encyclopedia
The Climate Change Levy 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
.
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.
, 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 April 1, 2007 http://www.ukbudget.co.uk/ukbudget2006/Business/budget06_climatechangelevy.cfm. With effect from 1 April 2009 (there was no change in 2010) the rates are:
A reduction of up to 80% 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. Part of the revenue is used to fund a number of energy efficiency initiatives, including The Carbon Trust
.
The Climate Change Levy effectively replaced the Fossil Fuel Levy
.
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
. Its aim is to provide an incentive to increase energy efficiency
Energy conservation
Energy conservation refers to efforts made to reduce energy consumption. Energy conservation can be achieved through increased efficient energy use, in conjunction with decreased energy consumption and/or reduced consumption from conventional energy sources...
and to reduce carbon emissions
Greenhouse gas
A greenhouse gas is a gas in an atmosphere that absorbs and emits radiation within the thermal infrared range. This process is the fundamental cause of the greenhouse effect. The primary greenhouse gases in the Earth's atmosphere are water vapor, carbon dioxide, methane, nitrous oxide, and ozone...
, however there have been ongoing calls to replace it with a proper carbon tax
Carbon tax
A carbon tax is an environmental tax levied on the carbon content of fuels. It is a form of carbon pricing. Carbon is present in every hydrocarbon fuel and is released as carbon dioxide when they are burnt. In contrast, non-combustion energy sources—wind, sunlight, hydropower, and nuclear—do not...
.
Scope and Purpose
Introduced on April 1, 2001 under the Finance Act 2000Finance Act 2000
The Finance Act 2000 is an Act of the Parliament of the United Kingdom prescribing changes to Excise Duties, Value Added Tax, Income Tax, Corporation Tax, and Capital Gains Tax...
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
Renewable energy
Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...
and approved cogeneration
Cogeneration
Cogeneration is the use of a heat engine or a power station to simultaneously generate both electricity and useful heat....
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 electricityElectricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...
, 0.15p/kWh on coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
and 0.15p/kWh on gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
. In the 2006 budget it was announced that the levy would in future rise annually in line with inflation, starting from April 1, 2007 http://www.ukbudget.co.uk/ukbudget2006/Business/budget06_climatechangelevy.cfm. With effect from 1 April 2009 (there was no change in 2010) the rates are:
| rate | |
| Electricity | 0.470p per kWh |
| Mains Gas | 0.164p per kWh |
| LPG | 1.050p per kg |
| Any other "taxable commodity" | 1.281p per kg |
A reduction of up to 80% from the levy may be gained by energy-intensive users provided they sign a Climate Change Agreement
Climate Change Agreement
When climate change levy was introduced in the UK the position of energy intensive industries was considered, given their energy usage, the requirements of the Integrated Pollution Prevention and Control regime and their exposure to international competition...
.
Revenue from the levy was offset by a 0.3% employers' rate reduction in National Insurance
National Insurance
National Insurance in the United Kingdom was initially a contributory system of insurance against illness and unemployment, and later also provided retirement pensions and other benefits...
. However, the 2002 Finance Act subsequently increased that rate by 1%, reversing the reduction. Part of the revenue is used to fund a number of energy efficiency initiatives, including The Carbon Trust
The Carbon Trust
The Carbon Trust is a not for dividend company limited by guarantee created by the UK government to help businesses and public organisations to reduce their emissions of carbon dioxide into the atmosphere, through improved energy efficiency and developing commercial low carbon technology...
.
The Climate Change Levy effectively replaced the Fossil Fuel Levy
Fossil Fuel Levy
The Fossil Fuel Levy is a levy paid by suppliers of electricity from non-renewable energy sources in the United Kingdom. The costs are shared by the suppliers and consumers, as a proportion of the cost is passed on to consumers in the cost of the electricity supplied...
.
See also
- Ecological tax reform
- Energy policy of the United KingdomEnergy policy of the United KingdomThe current energy policy of the United Kingdom is set out in the Energy White Paper of May 2007 and Low Carbon Transition Plan of July 2009, building on previous work including the 2003 Energy White Paper and the Energy Review Report in 2006...
- Energy use and conservation in the United KingdomEnergy use and conservation in the United KingdomEnergy use in the United Kingdom stood at 3,894.6 kilogrammes of oil equivalent per capita in 2005 compared to a world average of 1,778.0. In 2008, total energy consumed was 9.85 exajoules - around 2% of the estimated 474 EJ worldwide total...
- United Kingdom Climate Change ProgrammeUnited Kingdom Climate Change ProgrammeThe 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...
- Renewables ObligationRenewables ObligationThe Renewables Obligation is designed to encourage generation of electricity from eligible renewable sources in the United Kingdom. It was introduced in England and Wales and in a different form in Scotland in April 2002 and in Northern Ireland in April 2005, replacing the Non-Fossil Fuel...
Further reading
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External links
- HMRC - Climate Change Levy in depth
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