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The production cost of biofuels being still higher than that of conventional fuels, the policy of biofuels promotion in the EU is largely dependent on the implementation in Member States of Directive 2003/96/EC. In Switzerland, the taxation of transportation fuels (incl. biofuels) is regulated under the Mineral Oil Tax Law (MinOTL) of 21 June 1996 and the corresponding Ordinance (MinOTO).
Amendment to the Mineral Oil Tax Law (MinOTL)
On 23 March 2007, the Parliament adopted the amendment to the Mineral Oil Tax Law (MinOTL) [1], the purpose of which is to promote environmentally friendly fuels with the aim of reducing CO2 emissions and air pollution in road transportation.
The most important aspects of the new Law are presented below.
Tax reduction for fuels produced from renewable raw materials
The fuels from renewable raw materials are exempt from tax under certain conditions, concerning the global ecological balance and production social conditions. The Federal Council will make sure that the higher production costs of biogenic fuels, compared with those of fossil fuels, are not overcompensated. The competitiveness is examined annually by using the price difference between fossil fuels and biofuels. If it becomes too large, a partial tax will be introduced on the latter.
Proof of positive global ecological balance
The Federal Council defines minimum requirements for proof of a positive global ecological balance. A global ecological balance shall be reflecting in particular the agricultural and forestry production of renewable raw materials as well as greenhouse gases and air pollutants emitted during the manufacturing process. Emissions resulting from the manufacture of gasoline are used as a reference value. Detailed requirements on the global ecological balance are defined in the MinOTO.
Fuels produced in pilot and demonstration plants
Fuels produced in pilot and demonstration facilities within the meaning of MinOTL Article 17 and MinOTO Article 35 are now exempt from tax in accordance with MinOTL Article 12b and subject to the provisions thereof. Tax relief is granted only if the manufacturer demonstrates a positive global ecological balance.
Neutrality of revenues
The measures taken should not have any impact on the Confederation's revenues. The loss of revenue caused by the tax-exempt status of biofuels are offset by a higher taxation of gasoline. In order to ensure the neutrality of revenues, the tax rate applicable to gasoline is adjusted periodically to changing quantities subject to tax. The tax rate is adjusted every 1 to 2 years by the Federal Council.
Amendment to the Mineral Oil Tax Ordinance (MinOTO)
On 30 January 2008, the Federal Council adopted the revision of the Mineral Oil Tax Ordinance (MinOTO) corresponding to the new MinOTL. The new MinOTO entered into force on 1 July 2008 [2]. In particular, it specifies the list of "fuels from renewable raw materials" and the terms regarding the proof of positive ecological balance and acceptable production social conditions. It should be mentioned that bio-ETBE and bio-MTBE are not included in the list of fuels profiting from the tax exemption.
The main elements of the new Ordinance are listed below.
Article 19a. Tax relief for fuels produced from renewable raw materials
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Are considered as "biofuels from renewable raw materials":
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Bioethanol: ethanol from renewable raw materials;
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Biodiesel: methyl ester of vegetable or animal oils;
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Biogas: methane-rich gas from the fermentation or gasification of biomass;
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Biomethanol: methanol derived from renewable raw materials;
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Biodimethyl ether (DME): dimethyl ether from renewable raw materials;
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Synthetsis biofuels: synthesis hydrocarbons derived from renewable raw materials;
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Biohydrogen: hydrogen derived from renewable energy sources;
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Vegetable and animal oils or used vegetable and animal oils;
[…]
Article 19b. Minimum requirements regarding a positive global ecological balance
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The minimum requirements for a positive global ecological balance are met:
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if fuels from renewable raw materials, from production to use, according to their biogenic share, generate at least 40% less greenhouse gases than conventional gasoline;
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if fuels from renewable raw materials, from production to use, do not damage the environment in ways that are significantly higher than conventional gasoline; and
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if the production of renewable raw materials […] does not endanger tropical forest conservation or biological diversity.
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They are in all cases considered to be fulfilled for fuels manufactured in accordance with the latest technologies from waste or biogenic residues from the production or processing of agricultural and forestry products.
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It is considered that fuels from palm oil, soybeans and grains do not meet the minimum requirements prescribed in al. 1.
Article 19c. Proof of a positive global ecological balance
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In order to obtain tax relief for fuels from renewable raw materials, proof must be provided that these fuels meet the minimum requirements for positive ecological balance. The proof must be provided:
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for fuels imported: by the importer;
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for fuels manufactured in Switzerland: by the manufacturer.
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No evidence of the positive global ecological balance is necessary for fuels referred to in Art. 19b, al. 2.
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Evidence of positive global ecological balance can also be provided for fuels from raw materials referred to in Art. 19b, al. 3.
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The proof must be submitted in writing to the Directorate General of Customs before the delivery of the first tax return for fuels receiving tax relief.
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The Federal Department of Environment, Transport, Energy and Communications regulates the methods of obtaining evidence of positive global ecological balance.
Article 19d. Minimum requirements regarding socially acceptable production conditions
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The minimum requirements for "socially acceptable" production conditions are fulfilled if, in the raw materials cultivation and fuel production, social legislation applicable at the location of production, or at least the fundamental conventions of the International Labour Organization (ILO), have been met.
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The Federal Department of Economic Affairs rules the arrangements.
Gasoline tax rate adjustment Ordinance
On 30 January 2008, the Federal Council also approved the new Ordinance on the adjustment of mineral oil tax rates on gasoline [3]. The loss of revenue caused by the tax-exempt status of biofuels is indeed be offset by a higher taxation of gasoline. In order to ensure the neutrality of revenues, the tax rate applicable to gasoline is adjusted periodically to changing quantities subject to tax. The tax rate is adjusted every 1 to 2 years by the Federal Council.
The two articles of the new Ordinance are listed below.
Article 1. Tax rate
For goods number 2710.1111 of the Customs Tariff:
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The tax rate is 439.30 SFr per 1'000 litres at 15°C;
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The surcharge is 305.40 SFr per 1'000 litres at 15°C.
Article 2. Entry into force
This Ordinance shall enter into force on 1 July 2008.
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Producers and importers of biofuels wishing to benefit from tax exemption must bring the proof of a positive global ecological balance. The terms of the proof are provided in the Ordinance on the life-cycle assessment of fuels (OEcobiC) by the Department of the Environment, Transport, Energy and Communications (DETEC) [4].
Pilot and demonstration biofuel facilities (within the meaning of Article 35 MinOTO) having an authorization and producing already biofuels with tax exemption, will be subject to the provisions of the revised MinOTL only after a transitional period, i.e. from 1 January 2012.
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