Switzerland has set dates for two carbon permit auctions in 2016, weeks after the government announced that the country’s CO2 tax would rise by 40% next year as a result of emissions not falling fast enough.
The Swiss Federal Office for the Environment (FOEN) on Friday said it will hold a sale for 150,000 carbon allowances, called CHUs, from March 1-8 next year, and another for the same amount from Nov. 1-8.
Similar to previous auctions, the government will in both sales offer 135,000 units in a competitive auction and the remaining 15,000 in a non-competitive one.
FOEN is due to hold one more CHU auction in 2015 between Nov. 3-10.
The government conducted two auctions in the first two months of this year, selling a combined 272,169 allowances for 12 Swiss francs (€11.41/$12.47) each.
That was well below the clearing price of CHF 20 recorded in an auction last November, and CHF 40.25 posted in a May 2014 sale.
It is also a fraction of the country’s current CHF 60/tonne carbon tax, which will increase to CHF 84/tonne (€79.88/$87.44) next year after the country failed to make sufficient cuts to its emissions from fossil fuels.
The Swiss ETS, launched in 2008, covers around 10% of the country’s emissions and caps the GHG output of around 55 companies in its industrial manufacturing sectors including cement, steel, aluminum, oil refining, paper, glass, ceramics, chemicals and pharmaceuticals, as well as electricity and heating.
Participation in the Swiss ETS is mandatory for large emitters but voluntary for medium-sized ones that have the choice of paying the carbon tax or unilaterally abating their CO2 output instead.
TAX RISE
Earlier this month, FOEN announced that Switzerland had last year achieved cuts to its fossil fuel-related emissions of 21.5% below 1990 levels – just shy of the 22% threshold required to prevent a steep rise in its CO2 tax.
Under the government’s rules, the tax would rise by 40% to CHF 84 in 2016 from CHF 60 currently if the country failed to reduce its emissions by at least 22%.
A decline of 22-24% would result in the tax increasing by a fifth to CHF 72, while cuts above 24% would keep the levy unchanged.
FOEN said the 84-franc tax will add an estimated 16-22 cents per litre of extra light heating oil, and roughly 12-17 cents per cubic metre of natural gas.
Proceeds from the tax are to be mostly redistributed to consumers and businesses.
Switzerland’s carbon tax applies mainly to fossil fuel use outside of the power sector, as the country sources the vast majority of its electricity from hydro and nuclear.
Swiss voters in March overwhelmingly rejected a measure supported by the country’s two green parties to replace the country’s value-added tax (VAT) with a wider-ranging carbon tax.
EU LINKING
The EU and Switzerland are aiming to complete negotiations to link their emissions trading schemes sometime this year, with a view to formally connecting the two markets in 2016 or 2017.
The parties earlier this year said they had hoped to finish the talks in July.
The Swiss ETS cap was set at 5.63 million tonnes of CO2e in 2013, and similar to the EU scheme it tightens by 1.74%, to eventually reach 4.9 million tonnes.
This year’s cap is around 5.44 million tonnes.
CER TENDER
Separately, the Swiss government in April selected five companies from which to buy CERs following a tender seeking credits with “high sustainability co-benefits” to offset flight travel by its officials and other emissions from governmental activity.
The government said it had chosen Switzerland-based Foundation myclimate and South Pole Carbon Asset Management Ltd., Germany’s First Climate Markets AG and atmosfair, and Stockholm-headquartered Tricorona Climate Partner AB.
No further details were given, including the number of CERs contracted or the price paid.
By Mike Szabo – mike@carbon-pulse.com
