Switzerland Imposes Carbon Levy

by Ulrika Lomas, Tax-News.com, Brussels

06 July 2007

Switzerland has decided to impose a levy on carbon emission to help to reduce CO2 emissions and enable Switzerland to meet its commitment under the Kyoto Protocol.

The CHF12 (EUR7.5) per tonne of CO2 charge on fossil fuels used for heating (heating oil, natural gas) is being introduced in accordance with the decisions adopted by Parliament in March and by the Federal Council in June 2007. The CO2 Ordinance requires the introduction of a levy in January 2008 if CO2 emissions from heating and process fuels have not been reduced by at least 6% in 2006, compared with 1990 levels.

The CO2 statistics published on June 28 by the Federal Office for the Environment (FOEN) show that this target has not been met. Emissions in 2006 amounted to 95.4% of those in 1990, while the target was 94%. Although energy consumption declined between 2005 and 2006, a more substantial reduction would have been expected in view of the mild winter, the government said.

The charge is equivalent to a levy of approximately CHF0.03 per litre of heating oil and CHF0.025 per cubic metre of gas. No levy will be charged on wood or biomass, as these sources of energy are carbon neutral: the CO2 absorbed during their growth is released when they are burned.

The rate of the levy was set by Parliament and approved by the Federal Council. It will be progressively increased in 2009 and 2010 if CO2 emissions are not sufficiently reduced.

According to the government, the levy is not a tax but an incentive measure, the revenues from which are to be fully redistributed to members of the public via health insurance companies and to businesses as a percentage of wages paid. Revenues collected in 2008 are to be redistributed in 2010.

Businesses can be exempted from the levy if they take on a legally binding commitment to cap their CO2 emissions.

The roughly 600 businesses that have already agreed a CO2 emission cap with the federal authorities are required to have their voluntary agreement converted into a legally binding commitment by 1 September if they wish to be exempted from the levy in 2008. Extensions of the deadline may be granted on request.

Other businesses wishing to be exempted from the levy are required to submit a proposal to limit their CO2 emissions to the FOEN by 1 September.

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