Climate Change Levy and Combined Heat and Power

What is Climate Change Levy (CCL)?

CCL is a tax on energy use by business and will come into effect from April 2001.

Why is it being introduced?

Climate change is a worldwide concern that will have a greater effect over the next century unless greenhouse gas emissions are reduced significantly.

A voluntary target was agreed by the developed countries at the 1992 Earth Summit to reduce emissions of greenhouse gasses to 1990 levels by the year 2000. At Kyoto in 1997 a legally binding commitment was made by the developed countries to reduce greenhouse gas emissions by 5.2% below 1990 levels by 2012.

In addition, the UK has set its own objective to reduce emissions of Carbon Dioxide by 20% on 1990 levels by 2010.

Who pays it?

Anyone in commerce and industry who buy any of the following, for heating and motor purposes, will be subject to the levy:

* Electricity
* Coal
* Coal and hydrocarbon derivative e.g. orimulsion and petcoke; and
* Natural gas and liquid petroleum gas

The levy will be imposed on energy supplied to industrial and commercial consumers and will be administered by suppliers who will be required to register with Customs and Excise. The monies will be collected and passed on in a similar fashion to VAT.

The rates of the levy will be 0.15 p/kWh for coal and natural gas, 0.07 p/kWh for LPG and 0.43 p/kWh for electricity.

What consumption is exempt?

* Mineral oils, renewable sources of energy or waste materials, and by-products used for heating purposes, e.g. coke ovens and blast furnaces
* Road fuels (petrol, diesel, CNG, LPG) or aviation kerosene (AVTUR) and AVGAS
* Domestic use of energy and non-business use of energy by charities
* Energy used by public transport
* Fuels used as an input to the production of another fuel, e.g. CHP
* Non-energy use of fuels, e.g. fuels used for chemical processes

Applying for Exemption

If you believe that you may be entitled to an exemption from the CCL, you will need to contact your relevant sector association. If you do not belong to an association then we recommend that you contact Customs and Excise Climate Change Levy Helpline on: 0161 827 0332

to discuss your individual situation and they can advise you on whether or not you qualify for partial or full exemption from the levy.

Once an exemption level has been agreed, Customs and Excise will send you an Exemption Certificate; in order that Alliance Gas can accurately calculate your Levy, you must forward a copy of the Certificate to us as soon as possible. Unless we receive a copy of your Certificate, we are obliged to invoice you for the full 100% of the Levy with effect from 1st April 2001.

What are the benefits?

The levy will raise approximately £1 billion, all of which will be put back into business via a 0.3 percent point reduction in employers National Insurance Contributions and support for energy efficiency initiatives.

The levy is expected to result in the saving of at least 5 million tonnes of carbon a year by 2010. This will be a significant contribution towards Kyoto and domestic goals for reducing greenhouse gas and Carbon Dioxide emissions.

How can Alliance help?

For more information on the Climate Change Levy, send us an email and a member of the team will get in contact with you

What is CHP?

Combined Heat and Power (CHP) is point-of-use on site generation of electricity. A CHP unit will automatically convert a low-cost fuel (usually natural gas) into more valuable electricity.

Within the units there is a heat recovery system which will collect most of the heat of generation which can then be used on site. The purpose of the unit is that energy generation from the input fuel is maximised.

What are the benefits?

Due to the environmental benefits of CHP, it has been agreed that businesses using “Good Quality” CHP will be exempt from the Climate Change Levy (CCL), due to be introduced on business consumption of energy by April 2001.