Climate Change Levy: electrolytic hydrogen and energy context
Read the full outcome
Detail of outcome
At Spring Statement 2025, the government committed to remove Climate Change Levy (CCL) costs on electricity used in electrolysis to produce hydrogen. The government launched a consultation on the best legislative route to implement this, as well as to seek views to inform the scope of a wider review of CCL. The consultation was open for 6 weeks and received 49 written responses. Government officials held 11 meetings with around 60 different stakeholders during the consultation period – including trade associations, hydrogen producers and users, and academics.
A full summary of responses and the government response to this consultation is available at the link above.
As announced at Budget 2025, the government response confirms that electricity used in electrolysis to produce hydrogen as well as natural gas as a source of CO2 to produce sodium bicarbonate will be added to the CCL non-fuel use exemption. This will be implemented via an affirmative SI. Subject to parliamentary approval, the government aims for these legislative changes to be in force by Spring 2026.
The government is committing to consider the broader treatment of the production and supply of hydrogen as part of the CCL wider review, recognising interest from the hydrogen sector in a broader relief.
Beyond these changes, the government remains committed to the wider review of CCL and will update on next steps in due course.
Original consultation
Consultation description
At Spring Statement 2025, the government committed to removing Climate Change Levy (CCL) costs from electricity used in electrolysis to produce hydrogen. This will support the growth of low carbon electrolytic hydrogen production, which will play an important role in decarbonising the power system and hard to electrify industrial and transport sectors.
This consultation seeks views to determine the best legislative route to remove these CCL costs and ensure the commitment is delivered in a way that achieves government’s objectives whilst avoiding unintended consequences.
The government is also looking to the future and it is important for the UK’s tax system to remain agile and up to date with changing contexts. The wider energy landscape has changed significantly since CCL was introduced, and will continue to develop, therefore, the government also announced that it will conduct a wider review of CCL. To inform the scope of this review, this consultation seeks views on other areas where CCL may need to be reviewed to ensure it is aligned with developments in the changing energy landscape and the government’s clean power and net zero missions.
Documents
Updates to this page
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Outcome added.
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Consultation on Climate Change Levy: electrolytic hydrogen and energy context accessible version added.
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First published.