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The UK government announced exemptions from the Climate Change Levy for electricity used in electrolysis for hydrogen production and natural gas used as a carbon dioxide source for sodium bicarbonate made from soda ash. These exemptions aim to enhance competitiveness for low-carbon hydrogen production, which is crucial for meeting clean power goals by 2030 and net zero targets by 2050.

The government plans to implement these changes in Spring 2026, pending approval from the House of Commons. A consultation held in May 2025 identified the need for these exemptions, with 41% of responses from hydrogen producers.

This adjustment will treat the specified uses of electricity and natural gas as non-fuel uses, exempting them from the levy without expected impacts on the Exchequer. The measure aims to support the growth of the low-carbon hydrogen and chemicals sectors.