What is the effect of global warming on my business energy bills?

June 9th, 2020
What

What is the effect of global warming on my business energy bills?

Global warming isn’t something that can be ignored any longer. Whether we like it or not, governments around the world are taking steps to limit harmful emissions that are contributing to global warming. And this has a knock-on effect on business energy costs.

But apart from looking out for cheap business electricity suppliers, what can businesses do to keep on top of spiralling energy costs? We take a look at the available options, to guide you through the maze of energy taxes and grants.

Understanding the Climate Change Levy (CCL)

The Climate Change Levy, also referred to as the CCL, was introduced in the UK back in the spring of 2001. It was designed to be an essential part of the Climate Change Programme, which aims to dramatically reduce the impact that businesses have on the environment.

In essence, the Climate Change Levy is a tax on fossil fuels. The CCL is imposed on businesses according to their consumption of gas, electricity and solid fuels. It’s only applied to businesses that use significant amounts of fossil fuels, so if you run a small business, or you’re working from home, for example, you won’t have to pay it. The aim of the charge is to encourage businesses that use large amounts of fossil fuel to switch to more renewable energy sources, such as wind, solar or hydro power.

In some cases, where a business is involved in horticulture, for example, or where energy is very intensively used, reduced rates of CCL may apply. If this is the case, the business is obliged to enter into a Climate Change Agreement, or CCA, with the Environment Agency. This qualifies the business for reduced charges which can make a huge difference to the amount payable. The reduction in electricity charges can be as much as 90%, with up to 65% in reduced costs for gas, coal and LPG.

It’s down to each individual business to register for CCL payments where necessary. Failure to comply with the legislation will result in hefty financial penalties. The cost of CCL appears in an itemised format on the standard business energy bill, making it crystal clear exactly what is being paid for. The business energy suppliers are then responsible for collecting CCL sums and transferring them across to HMRC.

It’s worth exploring whether your business may qualify for an exemption from paying the CCL, or you may be able to arrange to pay at a reduced rate under some circumstances. Your business energy suppliers may be able to point you in the right direction for help and advice, or you could search online for further information. Making your business more energy efficient is the best route as this will dramatically cut your business energy consumption and, therefore, your energy costs too.

Taxes

The UK government hopes that the introduction of high taxes against the cost of non-renewable energy sources will encourage businesses to change their working practices accordingly. But this is a long, ongoing process. There are currently four separate environmental taxes that businesses are having to pay, covering energy, pollution, resources and transport, but it’s the taxes on energy that raise the biggest revenues.

According to official ONS figures, environment taxes were responsible for generating £46 billion, with around three-quarters of that sum generated purely from energy taxation. In fact, energy taxes make up around 2.5% of GDP within the UK.

According to the recent budget details released this March, the Chancellor of the Exchequer is allowing business gas suppliers to increase the cost of gas, as the taxes are set to rise in April 2022. Although that’s undoubtedly good news for the business gas suppliers themselves, big businesses are unlikely to be celebrating.

Grants

Depending on your industry, it’s possible that there are grants and awards available to help your business to become more energy efficient. Switching to LED lightbulbs can represent huge annual savings, for example. And it’s worth looking into biomass boilers as a way to generate extra savings too, along with solar panels.

We’ve already pointed out the option of paying a reduced climate change levy under some circumstances. But there are other incentives on offer too. Businesses that choose to become more energy efficient can expect to receive generous capital allowances. There’s the option of a single energy efficient asset deduction from your business pre-tax profits. It might even be worth investing in energy efficient staff vehicles too, as well as looking into other ways of making your organisation move towards a more carbon neutral position.

Look for schemes that reward businesses for achieving specific energy targets. These can lead to further tax reductions, with the government committed to rewarding those companies that demonstrate a commitment to reducing waste and operating more efficiently.

And of course, searching for cheap business electricity suppliers online can lead to a reduction in the cost of energy bills. Keep scrutinising your business energy bills, and always make sure you’re placed on the cheapest and most economical tariffs for your usage.

Get Business Energy Quotes!

Swich to the cheapest deal & Save Up To £1,038!!!

Compare Now
4000+ reviews