EU and Switzerland finalize linking of their emissions trading schemes

Swiss and EU flags in Geneva

The Swiss Federal Office for the Environment (FOEN) announced on Monday (Jan. 25th) that, after five years of negotiations, Switzerland and the European Union (EU) are now ready to link their emissions trading schemes (ETS). The agreement has been finalized by Jos Delbeke, Director General of the EU’s Directorate-General for Climate Action and the Swiss counterpart represented by Bruno Oberle, Director of FOEN (until the end of 2015) and Dominique Paravicini, Deputy Director of the Directorate for European Affairs (DEA). The agreement will allow mutual recognition and the possibility to exchange allowances in the respective schemes. To enter into force, it now must be signed and ratified by both sides.

Both Switzerland and the EU have a domestic emissions trading scheme in place and have been negotiating their linking since 2011, as it was initially scheduled to start in 2013 but had been then postponed due to lengthy reforms procedures.

In particular, the Swiss ETS was launched in 2008, with a 5-year voluntary phase. In 2013 the scheme became mandatory for large, energy intensive industries whereas medium-sized industries may still join it on a voluntary basis. At the moment, it involves 55 companies, covering 5.5 million tonnes of carbon emissions. Running from 2013 to 2020 the mandatory phase of the Swiss ETS has been already designed to match EU ETS provisions (e.g. allocation rules) and to allow for the use of credits from other schemes or offsets. Conversely, the EU has the world’s biggest ETS, now in its third phase (from 2013 – 2020) and covering around 45% of total EU emissions. It is a cornerstone of the European Union’s mitigation policy although in recent times it experienced a growing surplus of allowances that risks undermining its effectiveness. This is the reason why the European Commission is now in the process of defining some structural reforms to stabilize the market in the longer term.

According to the FOEN’s release, the linking of the two schemes will result in the strengthening of emission trading as a tool to combat global climate change as well as in reinforcing partnership among companies on both sides.
In addition, the linking process will enable Swiss operators to trade emission permits on the larger and more liquid EU market, resulting in more stable prices and allowing them to enjoy greater flexibility in meeting their CO2 targets.
Aircraft operators, currently not included in the Swiss system but part of the EU ETS since 2012, shall enter the scheme with the entry into force of the agreement.

(Image: Swiss and EU flags in Geneva, May 2015 . Photo credit: European External Action Service/Flickr).