Swiss carbon tax

Switzerland introduced a CO2 tax on fossil fuels used in stationary sources in 2008. The levy covers around 40% of the country’s greenhouse gas emissions, primarily in the heating and process fuel sectors (fossil fuel for electricity generation – mainly small CHP and district heating – amounting to 1.2% of total generation). The levy is currently set at CHF 96 (EUR 89)/tonne of CO2 and from 2022, will be CHF 120/tonne. Two-thirds of Switzerland’s carbon tax revenues are returned to households and businesses through reductions in health insurance charges and social security payments. This redistributive policy design reduces the burden of the policy cost on households. In 2018, the Swiss Federal Office for the Environment (FOEN) estimated that carbon tax revenues were CHF 1.2 billion (EUR 1.1 billion), and each Swiss resident received CHF 88.8 (EUR 82.5) via the redistribution policy. Because carbon taxation faces questions of political feasibility, the double dividend benefit from carbon tax revenue redistribution also fosters support for the policy. Nonetheless, recent legislation to increase the carbon price on stationary sources and indirectly (through higher offset obligations) on transport fuels was narrowly rejected in a June 2021 referendum, highlighting the ongoing challenges over public acceptance of higher fuel prices.

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