Carbon emissions and the law

Most businesses are not required by law to lower carbon emissions, though some must measure and report them. In the future, a carbon tax and Environment Bill may affect your business.

Congestion, LEZ and ULEZ charges apply to drivers in London and other cities.

Measuring and reporting carbon emissions

Only large companies – public limited companies and some others – must report their energy use and carbon emissions every year.

Large companies have at least 2 of:

  • a gross income of £36 million or more
  • balance sheet assets of £18 million or more
  • 250 employees or more

There are no current reporting requirements for small businesses. Some may benefit from doing so voluntarily, including those who:

  • sell to larger businesses that must report emissions
  • have customers that value lower carbon impact
  • need to reduce energy and transport costs
  • want to be prepared for future legal changes

Guidance on voluntary emissions reporting

To get started:

  1. Identify your business activities that release emissions
  2. Collect yearly data such as litres of fuel and kWh of energy used
  3. Convert to emissions using a free carbon footprint calculator
  4. Report them on your website or anywhere relevant to customers

Once you have a benchmark measurement for your business, you can set goals for how to reduce emissions year over year.

One way to voluntarily report your business’s progress is to make the SME Climate Commitment.

Carbon tax

The UK does not currently have a tax directly applied to goods and services that create carbon emissions. In February 2021 media reported that government was considering a direct carbon tax, though official plans have yet to be released.

Environment Act

The UK government passed the Environment Act in 2021. It sets legally binding targets to improve air and water quality, waste treatment and recycling, and halt deforestation and species decline.

SMEs may be affected if they produce plastic packaging or deal with forest risk commodities such as cocoa, rubber, soya, and palm oil.

Congestion charges, LEZ and ULEZ in London

Drivers in London city centre must pay a £15 daily congestion charge from 07:00 to 22:00. Electric vehicles are exempt from this charge until December 2025.

You must pay an additional ultra low emission zone (ULEZ) charge if your vehicle doesn’t meet standards. It’s £12.50 daily for vehicles, £100 for lorries and buses.

Van and lorry drivers in the greater London area must pay a daily low emission zone (LEZ) charge if your vehicle doesn’t meet standards. This includes:

  • £100 daily for vans and diesel vehicles that don’t meet Euro 3 standards
  • £100 daily for HGVs and lorries that don’t meet Euro VI standards, but meet Euro IV
  • £300 daily for HGVs and lorries that don’t meet Euro IV

Find out what charges apply to your vehicle on the Transport for London website.

Clean air zones in Bath, Birmingham and other cities

Drivers in Bath and Birmingham must pay a daily Clean Air Zone (CAZ) charge if their vehicles don’t meet standards or qualify for exemptions.

Costs range from £8 for smaller vehicles to £100 for HGVs and lorries. Find out what charges apply to your vehicle on GOV.UK.

Other cities with planned CAZ charges include:

  • Bradford
  • Bristol
  • Greater Manchester (under review)
  • Portsmouth
  • Sheffield
  • Tyneside – Newcastle and Gateshead