UK Government's Commitment to Transform Tax System and Support Low Carbon Hydrogen Production
Key Ideas
- The UK government is working to transform its tax system to support businesses and the economy, with a focus on adapting to the changing energy landscape.
- As part of its commitment to low carbon initiatives, the government will remove Climate Change Levy costs on electricity used in electrolysis for hydrogen production, aiming to boost the low carbon electrolytic hydrogen sector.
- Support for 11 low carbon, electrolytic hydrogen projects through the Net Zero Hydrogen Fund and the Hydrogen Production Business Model will assist in bridging the cost gap between low carbon and high carbon fuels.
- Consultation is ongoing to review and update the Climate Change Levy in line with the UK's evolving energy landscape, ensuring it aligns with government missions towards net zero emissions.
The UK government has initiated efforts to enhance the country's tax system with a strategic focus on aiding businesses and fostering economic growth in alignment with the changing energy landscape. An integral part of this transformation involves the review and potential revision of the Climate Change Levy (CCL), initially introduced in 2001 to promote energy efficiency. In a recent announcement during the Spring Statement 2025, the government outlined plans to exempt CCL costs on electricity utilized in the electrolysis process for hydrogen production, emphasizing the importance of ensuring CCL remains relevant and supportive of low carbon electrolytic hydrogen production. Furthermore, support amounting to £90 million has been allocated to back 11 low carbon, electrolytic hydrogen projects that secured contracts in the first Hydrogen Allocation Round (HAR1). This financial aid, sourced from the Net Zero Hydrogen Fund and the Hydrogen Production Business Model, aims to facilitate the transition to low carbon hydrogen and mitigate the financial disparities between low and high carbon fuel options. The ongoing consultation encompassing the CCL review seeks to gather input on potential adjustments to the tax system to effectively address the evolving energy dynamics in the UK. By aligning CCL and other tax components with the country's clean energy mission, the government aims to propel the growth of the low carbon electrolytic hydrogen sector, in pursuit of national emission reduction goals.
Topics
Policy
Energy Efficiency
Renewable Electricity
Low-carbon Projects
UK Government
Energy Landscape
Tax System
Climate Change Levy
Clean Energy Mission
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