The levy will fund compensation of residual operational emissions through high-quality carbon removal projects. The Group also decided to further curb its flight emissions with a CO2 reduction target of 30% in 2021.
In the fight against climate change, companies can use internal carbon pricing as an important tool to incentivise low-carbon behaviour and decision making. Starting January 2021, Swiss Re's internal carbon levy will increase from today's USD 8 per tonne CO2 to USD 100 per tonne 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)1. The levy will gradually increase to USD 200 per tonne CO2 by 2030.
In addition to the new levy, Swiss Re has also announced it will cut emissions from air travel by 30% in 2021, relative to the 2018 benchmark. This means that the currently suppressed business travel activity will not go back to the pre-COVID-19 levels.
Christian Mumenthaler, Swiss Re's Group Chief Executive Officer and co-chair of WEF's Alliance of CEO Climate Leaders, said:
"Today's announcement is yet another proof point of how Swiss Re delivers on the climate action component of our sustainability strategy,". "It also underscores our belief that leading companies can and must propel climate protection beyond mere compliance with current regulations."
Swiss Re is a signatory to the 'Paris Pledge for Action'. In 2019, it confirmed this position by signing the UN Business Ambition for 1.5 degrees Celsius pledge and by becoming a founding partner of the UN-convened Net-Zero Asset Owner Alliance, thereby committing to net-zero emissions by 2050 on the liability and asset side.
For its own operations, Swiss Re committed to achieve net-zero emissions already by 2030. This means that all operational CO2 emissions that cannot yet be reduced need to be compensated by negative emissions, ie removed from the atmosphere and stored permanently (see also Swiss Re's SONAR 2020 report).
Since carbon removal is still a nascent industry, this new way of emissions compensation comes at a price. Swiss Re's new 10-year carbon levy scheme secures the required funds for purchasing removal services from impactful, durable and scalable carbon removal projects.
To limit global warming to well below 2 degrees Celsius - in accordance with the Paris Agreement - climate science predicts the need for billions of tonnes of CO2 to be annually removed and stored until and after 2050 (IPCC SR15, 2018).
Unprecedented emission reduction efforts need to be complemented by the rapid scale-up of carbon removal capacity. Swiss Re believes that the insurance industry can play a pivotal role through own sustainable operations, risk knowledge, risk transfer solutions and investments.