The Government introduced the Climate Change Levy (CCL) in 2001 as part of a wider array of instruments to reduce greenhouse gas emissions. It is an energy tax rather than a carbon tax. The CCL is levied on supplies of electricity, gas and solid fuels and it applies to industry, agriculture and the public sector; and on large power generators that use fossil fuels, through the Carbon Price Support (CPS) mechanism.

As the CCL would be punitive to operators of the types of manufacturing processes that are energy-intensive, economic instruments called Climate Change Agreements (CCAs) were introduced. These are used by industry to qualify for significant discounts on the CCL in return for agreeing to increase the efficiency of energy use.

There are three regulatory bodies involved in the implementation and management of the CCL and CCAs.

  • Her Majesty’s Revenue & Customs (HMRC), which collects the levy.

  • The Department for Business, Energy & Industrial Strategy (BIES) which is responsible for policy.

  • The Environment Agency (EA), which manages the CCAs.

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