Introducing our triple-digit Carbon Steering Levy

Rationale behind the price level of our Carbon Steering Levy: The anticipated average price of high-quality removals is illustrative, based on today’s market intelligence and price projections of various carbon removal solutions (weighted by their potential) as in the Special Report on Global Warming of 1.5 °C published by the Intergovernmental Panel on Climate Change in 2018 (IPCC SR15).

In September 2020, we took a significant step forward on our journey towards net-zero emissions in our operations, announcing the introduction of a triple-digit real internal carbon price.

Starting in January 2021, we are increasing our internal carbon price from USD 8 to USD 100 per tonne of CO₂, thus following the call by the UN Global Compact on companies to price carbon at a minimum of USD 100 per tonne of CO₂. Swiss Re is the first multinational company to announce a triple-digit real carbon levy on both direct and indirect operational emissions (such as business travel). By 2030, the levy will gradually increase to USD 200 per tonne of CO₂, the market price we expect for high-quality removals at that point in time, based on cost projections by the Intergovernmental Panel on Climate Change (IPCC) and current market intelligence.

The new ten-year carbon pricing scheme will directly support our two principal measures aimed at achieving net-zero emissions by 2030, ie “Do our best, remove the rest”. Firstly, a stringent price on carbon will help us achieve further emission cuts by incentivising concrete reduction measures, hence its name Carbon Steering Levy. To this end, we are making sure that the levy is displayed at all times and all levels of decision-making, for instance in the travel booking tool when comparing flight options.

Secondly, the levy will secure the funds required to purchase removal certificates from high-quality, ie impactful, durable and scalable carbon removal projects. Since carbon removal is still a nascent industry, this new way of compensating emissions comes at a price, and securing sufficient funding is crucial.

Based on the funds expected from the levy, we have developed a spending plan for our emissions compensation requirements over the next ten years until 2030. Until 2020, we purchased 100% high-quality carbon offsets in the price range of USD 5–20 per tonne. Thanks to the new levy, we will be able to add more and more high-quality carbon removals to our compensation mix, which at present can cost up to several hundreds of USD per tonne. By purchasing a mix of the two certificate types, we can set the average compensation cost so as to match the price level of the Carbon Steering Levy.

For 2021, this means a split of 10% removal and 90% carbon offsets, together costing USD 100 per tonne on average. By 2025, we will have increased the levy to USD 145 and expect to purchase a mix of 50% offsets and 50% removals. In 2030, when the levy will be at USD 200 per tonne, we expect to be able to purchase 100% removals – as required by our net-zero target.

We will procure the removals using a combination of three approaches: long-term Carbon Removal Purchasing Agreements (CRPAs) with strategic partners, payments into aggregation solutions like a Carbon Removal Fund (CRF), and conventional “over-the-counter” purchases.

With a ten-year planning horizon and a transparent, triple-digit price level, our new Carbon Steering Levy sends a powerful market signal to the emerging carbon removal industry. By entering long-term CRPAs, Swiss Re can establish itself as a credible partner in the carbon removal space, which also has benefits for our business: It should open doors for our underwriters and asset managers to access the new risk pools and asset classes of the emerging low-carbon economy.