Linking of emissions trading schemes: Agreement ratified by Switzerland and EU

The Agreement on the linking of the Swiss and EU emissions trading schemes (ETS) has been ratified by the representatives of both parties and will come into force on 1 January 2020. Linking the Swiss ETS with that of the EU will be beneficial for both environmental policy and the economy. From 2020 onwards, companies in the Swiss ETS will be able to trade emission allowances in the larger EU emissions market. In addition, emissions from civil aviation will be included in the Swiss ETS, as is already the case in the EU. The linking of the two schemes marks the first ETS linking between states anywhere in the world.

The Swiss ETS is an important market-based instrument for climate protection. Its purpose is to reduce the greenhouse gases produced by Swiss companies with very high levels of emissions. Linking the Swiss ETS with that of the EU will allow Swiss companies to participate in the larger and more liquid EU emissions market. The EU ETS covers approximately 2 billion tonnes of CO2 equivalent annually, compared with around 5 million tonnes for the Swiss ETS. The linking will lead to a convergence in Swiss and EU CO2 prices, creating a level playing field for participating companies.

Following the linking in January 2020, CO2 emissions from civil aviation and any fossil-fuel power plants will be included in the Swiss ETS (see Factsheet). This will apply to domestic flights and flights from Switzerland to countries in the European Economic Area (EU plus Iceland, Liechtenstein and Norway).

The Agreement signed with the EU on 23 November 2017 regulates the mutual recognition of emission allowances from the two ETS, each of which has its own legal basis. Switzerland will not therefore be adopting any EU law. The Swiss Parliament approved the Agreement on 22 March 2019 and accepted the necessary changes to the current CO2 Act. To implement these decisions, the Federal Council amended the CO2 Ordinance on 13 November 2019, in particular to enable civil aviation and any fossil-thermal power plants to be included in the Swiss ETS.

The amended CO2 Ordinance and the partially revised CO2 Act will come into force with the Agreement on 1 January 2020. To ensure that the linking continues after 2020, the necessary provisions will be included in a revision of the CO2 Act.

National and regional ETS are in operation or under development worldwide. In the future, it will be desirable to link these schemes so that companies around the globe, regardless of their location, operate under comparable climate regulations. The linking of the Swiss and EU ETS is the first of its kind between states anywhere in the world and marks an important step towards closer international cooperation in the area of emissions trading.

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