Liechtenstein Extends Carbon Dioxide Tax

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The Liechtenstein Government has adopted a bill revising the Principality's Carbon Dioxide Act (CO2 Act), aligning the legislation with Switzerland's revised CO2 Act, and providing notably for the carbon dioxide levy imposed on fossil fuel to be extended until 2020. The Government has approved the corresponding report and application to parliament for ratification.

The Liechtenstein bill not only extends the carbon dioxide tax, which was introduced in Liechtenstein in 2008, but also contains provisions governing the emissions of newly registered cars, and introduces a "compensation" requirement for importers of fossil fuels, notably importers of petrol and diesel.

The bill brings Liechtenstein's law into line with Switzerland's revised CO2 Act, which entered into force in the Confederation on January 1, 2013. For competitive reasons, Liechtenstein agreed in 2010 to transpose Swiss federal legislation on environmental levies into national law, within the framework of the bilateral treaty concluded between Liechtenstein and Switzerland.

Switzerland's revised CO2 Act forms the cornerstone of Swiss climate policy. It sets an emissions reduction target for 2020 and sets out various measures for buildings, transport, and industry.

The revised CO2 Act maintains the incentive fee on fossil thermal fuels (CO2 levy) introduced in 2008 and raises it in step with interim targets. First, the CO2 levy increases the cost of heating buildings with oil or gas, making energy efficiency renovations and renewable energies more attractive. A portion of the levy is used for the buildings program, which promotes building renovations, investments in renewable energies, waste heat recovery, and building utilities optimization.

Furthermore, the revised Act introduces two measures aimed at reducing emissions caused by transport. In addition, importers of petrol and diesel must also compensate for a portion of motor fuel emissions by investing in climate protection projects in Switzerland.

The incentive fee for fossil thermal fuels provides an incentive to companies to operate as energy efficiently as possible. Companies that have committed to limit their greenhouse gases can be exempted from the levy by the Federal Government. Large companies in specific industries that generate a large quantity of emissions are automatically exempted from the CO2 levy and are instead involved in the emissions trading scheme. The Federal Government allocates a constantly decreasing quantity of emissions allowances to these companies. If the companies generate more than their allotted quantity of CO2, they purchase the emissions allowances they need to make up the difference within the emissions trading scheme.

Approximately two-thirds of the CO2 levy is redistributed to the general public, notably via a reduction in health insurance premiums. Since the redistribution is carried out per capita or per franc of salary independently of consumption, all households and installations that consume low quantities of fossil thermal fuels benefit from it.