Energy and carbon EWSNI
Climate change agreements and the Climate Change Levy
A climate change agreement (CCA) lets an energy-intensive site pay a reduced rate of Climate Change Levy, 92% off electricity and 89% off gas from 1 April 2026, in return for meeting energy-efficiency targets. A new six-year scheme began on 1 January 2026 with target periods to 2030 and reduced-rate certification to March 2033. The Environment Agency administers it for the whole UK; HMRC collects the levy.
At a glance
- Who must comply
- Voluntary. Open to facilities in eligible energy-intensive sectors (around 50 sector associations) that sign umbrella and underlying agreements.
- Thresholds
- Sector eligibility: energy costs of at least 10% of production value, or 3% to 10% with import penetration of at least 50%; facility must carry out an eligible process.
- Next key date
- 31 December 2026: end of target period 1 of the new scheme; annual reporting follows. 1 July 2027: certification period 1 begins.
- Regulator
- Environment Agency (UK scheme administrator); HMRC (levy and reduced rate certificates); DESNZ (policy).
- Maximum penalty
- Buy-out at the published price per tonne CO2e for missed targets; civil penalties of the greater of £500 or £25 per tonne for inaccurate information; loss of the reduced rate and HMRC tax penalties.
- Where to do it
- Through your sector association and the Environment Agency's CCA register; reduced rates claimed from suppliers with HMRC form PP11.
This probably applies to you if
- You operate a manufacturing, food processing, chemicals, metals, minerals, paper, plastics, textiles or similar energy-intensive site
- Your sector association holds an umbrella agreement with the Environment Agency
- Energy is a significant share of your production costs and you pay Climate Change Levy on electricity, gas, LPG or solid fuel
- You run a data centre, cold store, horticultural or other facility in a sector admitted to the scheme
How the scheme works
The Climate Change Levy (CCL) is a tax on business energy, charged by suppliers and paid to HMRC. Energy-intensive sectors can cut it by signing a climate change agreement. Each sector association holds an umbrella agreement with the Environment Agency setting a sector target, and each site holds an underlying agreement with its own target. Meet the target and you keep the reduced rate; miss it and you buy out the shortfall at a set price per tonne of CO2e.
The previous scheme's targets ended in 2022 and its reduced rates ran to March 2027. The new scheme started on 1 January 2026 under the Climate Change Agreements (Administration and Eligible Facilities) (Amendment) Regulations 2025, following the government's October 2024 response to consultation.
Target and certification periods
| Period | Dates |
|---|---|
| Target period 7 (TP7) | 1 January 2026 to 31 December 2026 |
| Target period 8 (TP8) | 1 January 2027 to 31 December 2028 |
| Target period 9 (TP9) | 1 January 2029 to 31 December 2030 |
| Certification period 7 (extended) | Reduced rates continue to 30 June 2027 |
| Certification period 8 (reduced rates) | 1 July 2027 to 30 June 2029 |
| Certification period 9 | 1 July 2029 to 30 June 2031 |
| Certification period 10 | 1 July 2031 to 31 March 2033 |
The statutory guidance numbers the periods on from the old scheme, so the first new target period is TP7. Targets are measured against a 2022 base year. Surplus performance can be carried over between target periods within the new scheme, but not from the old one. Light-touch annual reports on energy and emissions are due at the end of the first year of each two-year target period and are not used for assessment.
Climate Change Levy rates and the CCA discount
| Commodity | Main rate 1 April 2026 to 31 March 2027 | Main rate from 1 April 2027 | CCA discount |
|---|---|---|---|
| Electricity | £0.00801 per kWh | £0.00827 per kWh | 92% |
| Natural gas | £0.00801 per kWh | £0.00827 per kWh | 89% |
| LPG | £0.02175 per kg | £0.02175 per kg | 77% |
| Any other taxable commodity (coal, coke) | £0.06264 per kg | £0.06468 per kg | 89% |
To receive the reduced rate you give your energy supplier HMRC form PP11 (supplier certificate) stating the percentage of supply that qualifies, and keep a PP10 record of how you worked it out. Carbon price support rates for generators are separate and run to 31 March 2028.
Eligibility and joining
- Sectors qualify if energy costs are at least 10% of production value, or between 3% and 10% with an import penetration ratio of at least 50%. New sectors submit 2022 baseline data and were scheduled to join from January 2027.
- Facilities must carry out an eligible process listed in the regulations, and at least 70% of the energy supplied to the facility must be for use in its eligible installations (the 70/30 rule); sites below 70% must install permanent sub-meters. Energy covered by the UK ETS counts for eligibility but is excluded from targets.
- New entrants in existing sectors can apply between 1 January and 31 August each year from 2026 to 2029, and must be added before 1 January 2030; there is no minimum participation period before relief applies.
- Every facility, including existing participants, had to confirm eligibility before joining the new scheme and must self-certify compliance annually. The Environment Agency audits a sample of facilities each year.
Reporting, buy-out and penalties
At the end of each target period you report energy consumption and throughput so the Environment Agency can assess performance against the target. Shortfalls are settled by paying the buy-out price, which is set in advance for each target period from the weighted average of CCL rates for gas and electricity. Providing inaccurate baseline or reporting information carries a civil penalty of the greater of £500 or £25 per tonne of CO2e, and persistent non-compliance leads to removal from the scheme and loss of the reduced rate, after which HMRC can apply its own tax penalties.
Tip: CCA energy data is the same data you need for ESOS and SECR. Build one metering and reporting system and reuse it.
How to join and comply, step by step
Check sector eligibility
Find your sector association and confirm it holds an umbrella agreement; if your sector is new, check whether it met the energy-intensity tests.
Define the facility and eligible process
Map which energy use is inside the eligible process and apply the 70/30 rule to decide what is covered.
Submit baseline data and sign the underlying agreement
2022 baseline energy and throughput data through your sector association; targets are then allocated.
Claim the reduced rate
Send PP11 certificates to suppliers for each site and keep PP10 workings.
Report and self-certify
Annual compliance self-certification, light-touch reporting at the end of year one of each period, and full reporting at the end of each target period.
How it differs across the UK
- E England
A UK-wide scheme administered by the Environment Agency for all four nations; HMRC collects the levy.
- W Wales
Same UK-wide scheme; Welsh facilities deal with the Environment Agency as administrator.
- S Scotland
Same UK-wide scheme; Scottish facilities deal with the Environment Agency as administrator, not SEPA.
- NI Northern Ireland
Same UK-wide scheme and levy rates; Northern Irish facilities deal with the Environment Agency as administrator.
Key dates
-
End of climate change agreement target period 7 (TP7), the first period of the new scheme
-
Climate Change Levy main rates rise (electricity and gas £0.00827 per kWh)
-
CCA certification period 8 begins: reduced CCL rates for facilities that met their TP7 obligations
-
End of climate change agreement target period 8 (TP8)
Dates marked “Proposed” are announced or consulted on but not yet law. See the full deadlines calendar.
Fees and charges
| Item | Amount | Applies in | Notes |
|---|---|---|---|
| Climate Change Levy main rate, electricity and natural gas | £0.00801 per kWh 1 April 2026 to 31 March 2027 (£0.00827 from 1 April 2027) | EWSNI | Source |
| Climate Change Levy main rate, LPG | £0.02175 per kg From 1 April 2026 | EWSNI | Source |
| Climate Change Levy main rate, other taxable commodities | £0.06264 per kg 1 April 2026 to 31 March 2027 (£0.06468 from 1 April 2027) | EWSNI | Source |
| CCA reduced-rate discounts | 92% electricity, 89% gas, 77% LPG, 89% other From 1 April 2026 | EWSNI | Source |
Penalties and enforcement
Compliance checklist
Where to do it: official services
-
Climate Change Levy rates
Guidance
Current and announced main rates, reduced-rate discounts and carbon price support rates. HMRC EWSNI
-
Climate change agreements: statutory guidance 2026
Guidance
The statutory guidance for the new scheme: eligibility, targets, reporting and buy-out. DESNZ and Environment Agency EWSNI
-
Managing your climate change agreement (CCA)
Report or submit
How participants report, self-certify and manage their agreements with the Environment Agency. Environment Agency EWSNI
-
Climate Change Levy: supplier certificate (PP11)
Report or submit
The certificate you give suppliers to receive reduced-rate supplies. HMRC EWSNI
The law behind this
Questions people ask
What are the Climate Change Levy rates for 2026/27?
From 1 April 2026 the main rates are £0.00801 per kWh for both electricity and gas, £0.02175 per kg for LPG and £0.06264 per kg for other taxable commodities. From 1 April 2027 electricity and gas rise to £0.00827 per kWh and other commodities to £0.06468 per kg; LPG stays at £0.02175. Facilities with a climate change agreement pay 8% of the electricity rate and 11% of the gas rate.
How much does a climate change agreement save?
The reduced rates cut CCL by 92% on electricity, 89% on gas, 77% on LPG and 89% on other commodities. For a site using 10 GWh of electricity and 20 GWh of gas a year, the saving at 2026/27 rates is roughly £74,000 on electricity and £143,000 on gas, before any buy-out costs for missed targets and the administration cost of the scheme.
Who is eligible for the new CCA scheme?
Facilities in sectors whose association holds an umbrella agreement and that carry out an eligible process, with at least 70% of their energy used in the eligible installations. New sectors must show energy costs of at least 10% of production value, or 3% to 10% with import penetration of 50% or more. Every facility had to confirm eligibility to join the new scheme that started on 1 January 2026, and new entrants in existing sectors can apply between 1 January and 31 August each year until 2029.
What happens if we miss our CCA target?
You pay the buy-out price, set in advance for each target period from the weighted average of CCL rates, for every tonne of CO2e by which you missed the target. You keep the reduced rate as long as you pay. Surplus from an earlier target period in the new scheme can offset a shortfall, but surplus from the old scheme cannot be carried in.
Is a CCA the same as ESOS or the UK ETS?
No. A CCA is a voluntary tax-relief agreement with energy targets; ESOS is a mandatory four-yearly energy audit for large organisations; the UK ETS is a mandatory cap-and-trade scheme for large combustion and industrial installations. A site can be in all three, and the same metered energy data serves each of them.
Terms used in this guide
- Climate Change Levy (CCL)
- A tax on electricity, gas, LPG and solid fuel supplied to business and public-sector users, charged by suppliers and paid to HMRC.
- Umbrella agreement
- The agreement between a sector association and the Environment Agency setting the sector-wide target and terms.
- Underlying agreement
- The agreement between an individual facility operator and the Environment Agency setting the site's own target.
- Buy-out
- The payment per tonne of CO2e that a facility makes to cover a shortfall against its CCA target.
- PP11
- HMRC's supplier certificate that tells an energy supplier what proportion of a supply qualifies for the CCA reduced rate.
Sources
- Climate Change Levy rates, HMRC (updated 27 November 2025)
- Climate Change Agreements (Administration and Eligible Facilities) (Amendment) Regulations 2025
- Changes to the Climate Change Agreements scheme: government response, Burges Salmon
- Climate change agreements: statutory guidance 2026, GOV.UK
- New CCA scheme proportionate analysis (explanatory document to SI 2025/813)
Reviewed 14 October 2026. If you spot something out of date, email info@thamesenvironment.com.