Tax regulation mechanism (Carbon Price Floor)

Updated: 05.01.2019

Author: Georgios Maroulis

The Carbon Price Floor (CPF) is a tax levied on fossil fuels, which is applied in Great Britain from 1 April 2013. Carbon price support rates of Climate Change Levy (CPS rates of CCL) are applied to gas, solid fuels and liquefied petroleum gas (LPG) that are used for electricity generation. Electricity from renewable sources is exempt from this tax (Schedule 6 to FA 2000 as amended by FA 2013).

Eligible technologies

The Carbon Price Floor favours any type of generation of electricity from renewable sources (§ 42A of Schedule 6 to FA 2000 as amended by FA 2013).

Solar energy

Eligible

Geothermal energy

Eligible

Biomass

Eligible

Wind energy

Eligible

Hydro-power

Eligible

Biogas

Eligible

Amount

The amount of tax benefit equals the amount of the CPS rates of CCL, which the suppliers are exempt from. CPS rates of CCL from 01.04.2015 to 31.03.2016 were as follows (§ 42A of Schedule 6 to FA 2000 as amended by FA 2013):

CPS rate commodityCPS rate
Any gas in a gaseous state that is of a kind supplied by a gas utility0.00334 GBP per kWh (0.00417 €/kWh)
Any petroleum gas, or other gaseous hydrocarbon, in a liquid state0.05307 GBP per kg (0.06633 €/kg)
Coal and other taxable solid fossil fuels1.5686 GBP per GJ (2.03134 €/GJ)
CPS rates of CCL from 01.04.2016 to 31.03.2019 are as follows:
CPS rate commodityCPS rate
Any gas in a gaseous state that is of a kind supplied by a gas utility0.00331 GBP per kWh (0.00417 €/kWh)
Any petroleum gas, or other gaseous hydrocarbon, in a liquid state0.05280 GBP per kg (0.06633 €/kg)
Coal and other taxable solid fossil fuels1.54790 GBP per GJ (2.03134 €/GJ)

Addressees

Entitled party. The CPF is levied on fossil fuels used for electricity generation. For this reason, the suppliers of electricity from renewable sources are directly exempt from the obligation to pay the CPS rates of CCL (Schedule 6 to FA 2000 as amended by FA 2013). 

Obligated party. The suppliers' statutory entitlement to exemption goes hand in hand with the state's obligation to grant this exemption.

Procedure

Process flow

This scheme is based on obligations. There is no administrative procedure.

Competent authority

HM Revenue and Customs

Distribution of costs

State

The cost of exemption from the CPF is borne by the state in terms of lower tax revenue.

United Kingdom

Further information

  • HM Revenue and Customs (HMRC) – national tax and customs authority
  • +44 2920 501 261
  • HMRC website

Basic information on legal sources