EAC: Does not impose damaging economic burden

The Climate Change Levy (CCL) is on course to save 12.8 million tonnes of CO2 by 2010, according to a government report into the impact of the scheme.

Viewed as the second largest element of Labour's climate change programme, in terms of carbon saving, the CCL significantly raised awareness of potential carbon savings in the business environment before implementation.

This resulted in the majority of savings being made before the tax was actually introduced. As a result, the levy - essentially the tax burden on energy use - once introduced, has had "relatively little effect on business emissions."

The government also expects Climate Change Agreements (CCA) – which allow energy intensive businesses to receive an 80 per cent discount from the CCL – to save an additional seven million tonnes by 2010.

However, while the government claims funds acquired through the CCL are recycled to business by a 0.3 per cent cut in National Insurance contributions (NIC), this has proved controversial.

This is largely due to increases in NICs in 2003, while the contribution returned from CCL revenue has remained stable.

However, key to the findings was an understanding "the CCL package does not impose a damaging economic burden on UK business overall".