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Environmental Law

CO2 – Chile regulations on CO2 emissions

Current CO2 regulation

Law 20780 created a specific tax on a series of emissions – among them, there is CO2. This tax is applicable to establishments with fixed sources made up of turbines and boilers, which individually or in groups have a thermal power of 50 MWt (thermal megawatts) at least. This tax is applied on PM, NOx, SO2 and CO2emissions, and it amounts to 0.1 for each emitted ton according to the following formula:

Tij = CSCpi x Pobj

Tij = where «i» is the kind of contaminant and «j» is the location in USD value per ton.

CSCpci is the social cost of pollution per capita of the «i» pollutant.

In the case of CO2, the tax amounts to USD 5,00. This tax will not be applicable to sources that emit CO2 if they operate on the basis of non-conventional renewable means of generation whose primary source is biomass.

If the source is located in a zone that has been declared as a latent or saturated one, an additional factor is be applied – in which case the factor for latent zones is 1.1 and for the saturated ones is 1.3.

The Chilean Ministry of the Environment publishes on a yearly basis a consolidated list of the establishments that are subject to this tax.

Starting January, 2023

Law 21210, published in the Chilean Official Gazette on February 24, 2020, modified the system of applying this tax to contaminating sources. This change will not be effective until January 1, 2023.

The biggest change comprises eliminating the requirement for installed thermal capacity, moving to a system based solely on the amount of PM, NOx, SO2 and CO2 emissions from a fixed source facility. This change was meant to end with the inequities that arise between sources with high seasonal emissions and those that emit pollutants throughout the year but have a thermal power of less than 50 MWt.

This tax will be applied to PM, NOx, SO2 and CO2 emissions produced by establishments whose sources emit 100 or more tons of PM or 25,000 or more tons of CO2 per year altogether.

Hot water boilers for the exclusive use of personnel and generating sets with an output of less than 500 kWt are exempt from this tax. 

Establishments must submit to the Chilean Superintendence of the Environment monitoring report on emissions as per instructions to be issued by this agency.

Every year the Ministry of the Environment will publish a list of the establishments that are subject to this tax.

These taxes will have to be paid annually in the month of April and can be deducted as an expense for income tax purposes.

In order to avoid or reduce the payment of the tax, emissions can be compensated. For this purpose, projects to reduce CO2 emissions can be implemented, where the reductions are additional, measurable, verifiable, and permanent. In this compensation, it will not be possible to include the compensations that must be carried out due to the imposition of prevention or decontamination plans, emission norms, environmental qualification resolutions or any other legal obligation.

The emission reduction projects will be executed in the saturated or latent area where the emissions are generated or in the adjacent districts (“comunas”) where the pollutant emitters are located. The Chilean Ministry of the Environment shall issue a regulation that points out what requirements these projects, their applications and background must comply with. The Ministry of the Environment will also regulate a certification system through external auditors authorized by the Superintendence of the Environment, who will certify the fulfillment of the commitments contained in the compensation plan. Expenses incurred in emissions compensation projects may be deducted from income tax. This compensation system is set to start on February 24, 2023.

Last modified: 28/09/2020

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