UK Government to remove Climate Change Levy for green hydrogen producers
The UK Government will remove the Climate Change Levy (CCL) from electricity used to produce hydrogen via electrolysis, cutting costs for green hydrogen projects and bringing tax rules in line with Net Zero ambitions.
Announced in the Chancellor’s Spring Statement, the change addresses a long-standing imbalance: while hydrogen made from natural gas is already exempt from the levy, electrolytic producers have until now faced additional charges for the electricity they use – even when sourced from renewables.
The move is expected to improve the economics of green hydrogen projects and simplify future investment decisions.
A consultation published by HM Treasury outlines three legislative options to deliver the exemption, with the most likely route aiming to take effect before most Hydrogen Allocation Round 1 (HAR1) projects become liable for CCL payments.
Alongside the tax change, the government reaffirmed £90 million in capital support for the 11 HAR1 projects, which together represent 125MW of new electrolytic capacity across the UK.
A shortlist for the second allocation round (HAR2) is expected in the coming weeks.
Industry body Hydrogen UK called the announcement “a pivotal moment” for the sector.
