Differential Taxation of Electricity: Assessing the Compatibility with WTO Law, EU Law and the Swiss-EEC Free Trade Agreement
A study prepared for the Swiss Federal Finance Administration (FFA), the Swiss Federal Office of Energy (SFOE) and the Swiss State Secretariat for Economic Affairs (SECO), by Thomas Cottier, Ilaria Espa, Kateryna Holzer, and Tetyana Payosova.
Forming part of the second phase of the Energy Strategy 2050, the Swiss Federal Council seeks to prepare the groundwork for transferring current policies based on promotion of the use of renewable energy to a steering system providing appropriate incentives to foster recourse to renewable energy production. To this end, a future policy is planned to rely more on fiscal measures and less so on subsidies. Various measures are being considered in this context, including the introduction of a differentiated electricity tax based on electricity generation sources. The study assesses these options in the light of WTO law, Swiss-EU relations and EU law. It concludes that differential taxation, based upon different production and process methods (PPMs) for fossil, atomic and renewable forms of energy production can be rendered compatible with obligations under international law, provided that imported and domestic products based upon respective similar forms of production are either taxed equally or differences in taxation neither exceed what is required to create level playing fields among different forms of production nor what is required to achieve particular goals of environmental protection (climate change) and health policies (atomic risks).