HM Treasury launches consultation on Climate Change Levy

The Chancellor of the Exchequer, Rachel Reeves, delivered the 2025 Spring Budget on 26 March 2025, one of HM Treasury’s bi-annual report on economic and fiscal performance and plans.

Among other things, of note in relation to climate mitigation is the proposal to eliminate Climate Change Levy (CCL) costs on electricity used for electrolysis in hydrogen production. This proposal aims to promote the expansion of low-carbon electrolytic hydrogen, which is vital for decarbonising the power sector as well as industries and transport systems that are challenging to electrify.

To implement this commitment effectively, the government has launched a consultation to gather feedback on the most suitable legislative approach to removing these costs. The objective is to ensure the policy is executed in a way that aligns with government goals while minimising unintended consequences.

Looking ahead, the government acknowledges that the energy landscape has evolved significantly since the introduction of CCL and will continue to change. In response, a broader review of CCL will be conducted to ensure its alignment with developments in the energy sector and the government's clean energy and net-zero ambitions.

This consultation will run for six weeks, from 26 March to 7 May, with responses shared with  HMRC and the Department for Energy Security and Net Zero.

With appreciation to Amineh Farasatmand for her contribution in preparing this blog.