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Challenges to changes to the Climate Change Levy rejected


In Drax Power Limited & Infinis Energy Holdings Ltd v HM Treasury & HM Revenue and Customs [2016] EWHC 228 (Admin), Jay J has rejected a challenge to the removal of the Renewable Source Energy Exemption (the “RSE Exemption”) from the Climate Change Levy.

The CCL is an environmental tax introduced in 2001 which is levied on electricity supplied to business customers, and is intended to encourage energy efficiency and reduce carbon emissions. The effect of the RSE Exemption was that those supplying energy from a renewable source did not pay the tax, thus incentivising renewable generation. Pursuant to the scheme, renewable generators would be issued with Levy Exemption Certificates (“LECs”), which they would then sell to suppliers, who would redeem them to claim the exemption. The RSE Exemption was estimated to cost the Government approximately £40 million/month.

The RSE Exemption was removed with 24 days’ notice at the Summer Budget in July 2015, on the basis that it was outmoded and inefficient, and provided only indirect, rather that direct, support to generators. Further, a third of the value of the RSE Exemption went to foreign generators, who did not assist the UK in meeting its renewable energy targets.

The Claimants, renewable generators, contended that the withdrawal of the RSE Exemption with practical immediacy contravened the EU law principles of foreseeability and proportionality, and violated their Article 1, Protocol 1 property rights.  They argued that they had factored the benefit of the RSE Exemption into their decision-making, and that a minimum two-year lead time was required before it could be removed. Such a lead-time would have cost the Government almost £1 billion.

These claims were dismissed. Jay J concluded that the Defendants had not promoted any legitimate expectation that the RSE Exemption would not be removed without a two-year lead time, and a circumspect and prudent operator could have foreseen such a change. There was no basis on which to conclude that the decision was in any way poorly conceived or rushed. The Defendants had advanced a compelling case that the reform was justified in the public interest.


Oliver Jones appeared for the Defendants, HM Treasury & HM Revenue and Customs.