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Climate Change Levy Exemption to be Removed

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On July 8th, Chancellor George Osborne presented his 2015 Summer Budget wherein he announced the removal of the climate change levy exemption for electricity from renewable sources.

Effective as of midnight on 31 July 2015, renewably sourced electricity will no longer be eligible for CCL exemption under renewable source contracts. Those likely to be affected are generators of renewable source electricity, energy market participants, and suppliers of such electricity as well as businesses and public sector consumers benefiting from CCL exemption.

A transitional period beginning on 1 August 2015 was also put in place. During this time, electricity suppliers will be able to continue to exempt renewable source electricity generated before that date. The length of the transitional period is yet to be discussed.

One of the reasons for the removal of the exemption is to correct an imbalance in the tax system as it has been shown that taxpayers’ money has been benefitting renewable electricity generated overseas.

The CCL was put in place in 2001 in order to improve industrial and commercial energy efficiency and to increase demand for renewables, thus reducing greenhouse gas emissions. It is a UK-wide tax, targeted toward businesses and the public sectors. Since its introduction, renewable electricity has been exempt from the levy. However, the government is looking to meet its climate change objectives in a more cost-effective way.

Had it not been removed, the exemption would cost £3.9bn over this Parliament, with one-third going to renewable electricity generated overseas. This electricity does not contribute to the UK’s climate change targets, and it is, therefore, not economical that we allocate payments toward it.

We are currently waiting for energy suppliers to consider this change and what the commercial impacts may be. We will let you know as soon as we have more information from them.

The UK is on track to have at least 30% of electricity demand met by renewable energy sources. The new measure is not expected to impact this target.

Sources – gov.uk


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