Switzerland: Current CO2 Tax Does Little to Help Solar Thermal

Source: Swiss Federal Statistical Office

Switzerland implemented a carbon tax on fossil fuels for heat supply in 2008. It was set at Swiss Franc (CHF) 12 per tonne of CO₂, which was only 2.3 % of the then-average oil price for end consumers incl. VAT (see the table below). To achieve the expected reduction in fuel consumption, the government has increased the tax over the years and in 2018, it will be 8 times (96 CHF/t of CO₂ = 82 EUR/t of CO₂) what it was in 2008. Burning 1 litre of heating oil produces 2.65 kg of CO₂. At a levy of CHF 96 per tonne of CO₂, this leads to CHF 25 per 100 litres. The table shows that the tax raises the end consumer price by as much as 30 %, although it is still considerably below the most recent peak levels found between 2012 and 2014.

No levy has been imposed on biomass – as it is considered a carbon-neutral technology – and motor fuels, such as petrol and diesel. Some companies, for example, in CO₂– or energy-intensive markets, are exempt if they commit to reducing emissions or participate in the emissions trading scheme.

	2008	2016	2018	Maximum
Carbon tax	12 CHF/t of CO2	84 CHF/t of CO2	96 CHF/t of CO2	120 CHF/t of CO2
Tax per litre of heating oil (1 litre = 2.65 kg)	3 ct CHF/litre	22.3 ct CHF/litre	25 ct CHF/litre	31.8 ct CHF/litre
Annual oil price average for end consumers incl. VAT (6,000 to 9,000 litres), including carbon tax	108 ct CHF/litre	69 ct CHF/litre	79.9 CHF/litre (Sept 2017)
Proportion of carbon tax based on average oil price	2.8 %	32 %	31 %
Carbon tax per kWhth produced from oil	0.3 ct CHF/kWh	2.23 ct CHF/kWh	2.5 ct CHF/kWh	3.18 ct CHF/kWh

“From 2008 onwards, the CO2 tax introduction and high oil prices had allowed for strong growth on the solar thermal market, but then people got used to both,” said David Stickelberger, Managing Director of Swissolar, the national solar industry association. “In 2013, photovoltaics became competitive and oil prices went down. Consumers lost interest in solar thermal. It was rather a psychological effect than a real economic issue.”

The carbon tax could be more effective if linked to the market price of oil and gas: “That would be a good solution to counter the price fluctuations of conventional fuels,” said Stickelberger. “These fluctuations are one of the worst enemies of renewables because consumers think: ‘We’ll wait and see whether the price goes down again’ and they won’t invest in solar.”

To have a meaningful impact on the market, the tax needs to be much higher than it is now. The current maximum legal tax rate is CHF 120 per tonne of CO₂, which translates into 3.18 centimes per kWh (see the table above). Stickelberger is convinced that this is not enough, as solar heat prices in Switzerland are fairly high, between 15 and 40 centimes per kWh. To achieve competitiveness with the most cost-effective applications a tax of 240 CHF per tonne of CO₂ would be necessary, which is twice as much as the current maximum tax rate. Therefore the new CO₂ law, which is discussed in Swiss parliament next year, should propose a new maximum CO₂ tax level.

Websites of organisations mentioned in this article:

Swissolar: http://www.swissolar.ch

Federal Office for the Environment – CO2 tax: https://www.bafu.admin.ch/bafu/en/home/topics/climate/info-specialists/climate-policy/co2-levy.html