The levy is to encourage business energy efficiency

What is the climate change levy (CCL)?

The CCL was introduced in April 2001 to cut emissions from business.

It followed a report by Lord Marshall to devise a scheme that would protect the climate without harming competitiveness.

It is tax neutral - any money raised under the levy is given back through schemes to subsidise energy-saving investments and through reductions in national insurance.

And firms can often recoup the money through the energy they save.

They can also avoid the levy by using renewable energy (but not nuclear energy).

Also the biggest energy users are let off up to 80% of the levy if they come to voluntary climate agreements with the government to cut their use of energy.

Energy efficiency in business has improved consistently - by about 2% a year.

The chancellor ascribes this to the CCL. His critics say the related climate agreements are the real basis for the improvements.

Cambridge Econometrics say the package of reduction in NI plus the saving in overall energy use mean that the CCL has brought industry an overall 0.13% reduction in costs - as well as CO2 cuts.

What's wrong with it?

The CCL is part of a tangle of initiatives to cut energy from business. Critics say the whole is just too complicated.

Alongside it run the EU Emissions Trading Scheme (compulsory for heavy industry and power sectors); the UK Emissions Trading Scheme (voluntary scheme in which firms are "bribed" by government to lower emissions through trading) and climate change agreements between industry and government.

Another complaint is that the CCL is a blunt instrument. It applies equally to high-energy users like the cement industry that are already desperate to cut energy bills and firms in the commercial sector for which energy is such a small relative cost that an extra 5% levy makes no difference.

Green groups and the CBI had been expecting that the budget would do something to force commercial firms to stop wasting energy (for example by leaving on lights and computers at night).

But they are surprised and disappointed that the Treasury took no action against this section of business where emissions are actually rising.

This is all the more surprising because heavy industry generally faces more international competition than the commercial sector.

What's the difference between a carbon levy and the climate levy?

The Conservatives have proposed to scrap the climate levy and replace it with a carbon levy.

Details are scant so far , as the party is currently reviewing most of its policies.

But the levy will specifically target emissions of CO2 - not energy itself.

That would put up the price of dirty coal and relatively reduce the price of cleaner gas. This is what environmental groups have wanted from the start of the levy.

Mr Brown will be anxious that his climate ace isn't trumped - and it would not be surprising to see more changes to the climate levy from the chancellor.

What do the Lib Dems think?

Lib Dems and Greens are irritated by what they perceive to be grand-standing by Tory and Labour politicians on the environment.

Liberal Democrat shadow environment secretary Chris Huhne MP said the absence of detail in the Tory carbon levy proposal denoted more "empty rhetoric". �

"The Climate Change Levy may be flawed, but it has reduced emissions," he said.

"Mr Cameron has failed to grasp the nettle of environmental taxation. He is perpetuating the Tory-Labour myth that the planet can be made sustainable without changing personal behaviour.

"Unless Cameron begins to support an increase�in the overall level of green taxation, including transport and household energy - which accounts for a third of our carbon emissions, his words will mean nothing."