Chancellor Gordon Brown announced further important steps in his Budget of 17 April 2002 in the Government's strategy to protect the environment, continuing to work with business and consumers. These include further support for business energy efficiency through the climate change levy and business tax system.
The climate change levy is charged on the supply of electricity, coal, coke and gas to most non-domestic users. The rates at which it is charged, which are based on the amounts of chargeable commodities supplied, were unchanged by the Budget and remain as follows:
- Electricity: 0.43p per kWh;
- Gas (as supplied by gas utilities): 0.15p per kWh;
- Liquid petroleum/hydrocarbon gas (LPG): 0.96p per kg;
- Other taxable commodities: 1.17p per kg.
In the first year of the climate change levy's application, only certain supplies of electricity from combined heat and power (CHP) schemes satisfying the relevant criteria for Good Quality CHP under the CHP Quality Assurance programme were exempt from the levy. These were supplies made direct to an end user of electricity.
The changes announced in the Budget, which recognise the environmental benefits of CHP and will provide a further incentive for business to use this technology, will mean that all electricity generated by Good Quality CHP, whether supplied direct to an end user or sold to a supplier, will be exempt from the climate change levy, subject to EU state aids approval.
Similarly, the complete exemption for electricity produced from coal mine methane should encourage the use of this source of electricity, which otherwise results in emissions of methane gas (one of the greenhouse gases, the emissions of which are targeted under the Kyoto Protocol) to the atmosphere. This exemption is also subject to EU state aid approval.
The Chancellor also announced in his budget that a specific one-year extra-statutory concession will be issued before 30 April 2002 to allow relief from the climate change levy not claimed in 2001/2002 to be claimed over the second year of the levy's application. Currently, energy consumers entitled to relief from the levy are required to submit a certificate to their supplier in advance of the supply, for the relief to be given effect.
There have been instances where consumers could have received relief on an energy supply but did not submit a certificate in time. As part of the mandatory annual review process, energy consumers will now be permitted to factor in the amount of relief foregone when adjusting their certificates for 2002/2003.
According to DEFRA some CHP operators are also still paying Business rates on CHP installations and are not aware of how to claim tax exemptions for which they may be eligible (in essence, they need to contact the district valuer and ask for a revaluation).
Receipts from the CCL are recycled through the Carbon Trust, which was set up in April 2001 to boost the take-up of cost-effective, low-carbon technologies.
For further information please contact Robert Lane at robert.lane@cms-cmck.com or on +44 (0)20 7367 2021 or Amanda Seaton at amanda.seaton@cms-cmck.com or on +44 (0)20 7367 3454.
