Climate change agreements (CCAs): how they cut your Climate Change Levy

What a CCA is

A climate change agreement is a voluntary agreement between industry and the Environment Agency, which administers the scheme. In return for committing to reduce energy use or carbon emissions, operators get a discount on the Climate Change Levy (CCL), the tax on business electricity and gas. It applies across the UK.

It is aimed at sites with large or energy-intensive processes, not at the typical shop, café or office. If your bill is a few thousand pounds, a CCA is almost certainly not for you. If you run a factory, a cold store, a poultry or pig unit or similar, it is worth knowing about. See also factory and manufacturing energy.

How big is the discount?

GOV.UK shows the main CCL rate and the CCA reduced-rate discounts. For 2026-27 (from 1 April 2026) the main rate is 0.801p/kWh for both electricity and gas, rising to 0.827p/kWh from 1 April 2027. The CCA discount is 92% on electricity and 89% on gas in each of those years.

Worked example

A food-processing site uses 2,000,000 kWh of electricity and 3,000,000 kWh of gas a year, both within an eligible CCA target unit. Using the 2026-27 main rate:

Fuel	CCL at main rate	Share still paid	CCL with CCA
Electricity	2,000,000 × £0.00801 = £16,020	100% − 92% = 8%	£16,020 × 0.08 = £1,281.60
Gas	3,000,000 × £0.00801 = £24,030	100% − 89% = 11%	£24,030 × 0.11 = £2,643.30

Without a CCA the CCL would be £40,050. With one it would be £3,924.90, a difference of £36,125.10 a year. These figures use made-up usage to show the method, and the site must keep meeting its targets to keep the discount. Compare this with a café paying the main rate on 30,000 kWh, which owes £240.30 of CCL in a year, a sum that would not justify the effort of a CCA. For the main taxes, see VAT and the Climate Change Levy.

Who can join?

CCAs cover a wide range of sectors, from chemicals and paper to supermarkets and intensive pig and poultry farming, according to GOV.UK. There are two layers:

• Umbrella agreements. Held between a sector association and the Environment Agency. They set sector targets and list eligible processes.
• Underlying agreements. Held by the operator of a site or group of sites. Their targets come from the sector's umbrella agreement.

If you think you might qualify, you apply through your sector association, which manages the underlying agreements for its sector. Eligibility depends on your processes, so the first step is to ask your trade body.

The scheme from 2026

The CCA scheme was extended and reformed. The government's statutory guidance for the new scheme (February 2026) confirms it applies from 1 January 2026, with three target periods: 1 January to 31 December 2026, then 2027 to 2028, then 2029 to 2030. The Environment Agency is to administer the scheme through to 31 March 2033.

An application window for the new scheme, including one for new entrants, ran in 2025; an energy consultancy reported that the new-entrant window closed on 30 September 2025 and that the Environment Agency had temporarily restricted new applications while agreements were migrated. The tests for which new sectors can join were set in the government's response to its consultation.

We have not confirmed when, or whether, another application window will open. Ask your sector association or the Environment Agency before making plans.

Obligations

• Targets. Measure and report energy use and emissions against agreed targets in each target period.
• Keep the discount by meeting them. A facility keeps its discount only if the target unit meets its targets.
• Evidence. Keep records. Penalties apply for inaccurate reporting.
• Certificate. A reduced-rate certificate lists facilities entitled to the discount. Your supplier needs to know you are on it, otherwise it will charge the main rate.

How it appears on your bill

If your site is covered, your supplier should show CCL at the reduced rate, not the main rate. Check that the CCL line on your bill looks about 8% (electricity) or 11% (gas) of what the main rate would give. Ask the supplier to confirm your site is on its CCA records if not. See reading your business energy bill and how CCL affects your bill.

What if you do not qualify?

Most small businesses pay the main rate, with exceptions for very small users (the de minimis limits), and for domestic or charity non-business use. See who is exempt from CCL. Other ways to cut costs include an energy audit, efficiency grants and loans and, for qualifying manufacturers, support described on energy-intensive industry support.

Is a CCA worth the effort?

Think of it as a trade: a large levy saving in return for targets, reporting and audits. It tends to make sense when three things are true.

• Your CCL bill is big. Take your annual kWh of electricity and gas, multiply by 0.801p, and see the figure. Savings of the order shown above only exist at industrial volumes.
• Your processes are eligible. Eligibility is by process and sector, not by turnover or headcount, so a small but energy-hungry site can qualify while a large office does not.
• You can meet the targets. A missed target can mean losing the discount for that period, so be realistic about what your plant can do.

Simple test

If your annual CCL at the main rate is under about the cost of a day or two of consultant time, a CCA is unlikely to pay. For a site with a CCL bill of £40,000, as in the example above, it is a serious saving worth pursuing.

Don't confuse a CCA with other schemes

• De minimis exemption: automatic for very small supplies; not a CCA.
• Domestic or charity non-business use: a different relief, based on how the energy is used.
• Energy-intensive industry support: separate schemes, such as help with network and policy costs for qualifying industries. Details are on the page about energy-intensive industry support, and they are not relevant to typical small businesses.
• Government bill support: there is no general business support scheme in 2026, and the Energy Bills Discount Scheme ended on 31 March 2024. See government help with business energy bills.

Next steps

1. Ask your trade association whether your processes sit under an umbrella agreement.
2. Estimate the CCL you pay now: annual kWh × 0.801p.
3. Check the Environment Agency's current guidance for application windows.
4. Tell your supplier once your site is certified, and check the next bill.