Law 20780 on incorporating tax measures - Chile carbon tax

The Chile carbon tax is a part of the tax on air emissions from contaminating compounds (impuesto destinado a gravar las emisiones al aire de compuestos contaminantes or ‘impuesto verde’), aiming to reduce the negative impacts of fossil fuel use for the environment and public health. Chile established a carbon tax in 2014 as part of wider tax reforms to increase taxes for big businesses and lowering them for individuals. The carbon tax went into effect in 2017 and was later updated through amendments in 2020. Following this broader tax reform, which went into effect on January 1, 2023, the carbon tax applies to installations emitting 25,000 tCO2 or more, as well as to those that release more than 100 tons of particulate matter into the air each year . Under the previous legislation (in effect until 2022), installations with a thermal capacity equal to or greater than 50 megawatts were subjected to the tax. The amendments also introduced the possibility to use offsets to meet compliance obligations, for which a regulation (reglamento) was established and entered into effect on February 24, 2023 . The carbon tax rate is USD 5/tCO2.In December 2021, the Chilean government recommended a CO2 price of at least a USD35/tCO2 by the end of the decade as part of updated Energy Policy 2050. The new president elect proposed a ‘Green Tax Reform’ including a gradual increase of the carbon tax up to USD 40/tCO2, but no timeframe was specified.

Source: World Bank Carbon Pricing Dashboard

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