Switzerland and the European Union have linked their trading systems for C0₂-equivalent emission allowances. This helps reduce greenhouse gas emissions in the most cost-effective way. The EU’s  emissions trading system (EU ETS) is the largest market for emission allowances worldwide, which makes it key to the fight against climate change.

Emissions trading is about trading in certificates that entitle the holder to emit a certain amount of CO₂.  They can be allocated or traded, which effectively puts a price on emissions.  The goal is to give carbon-intensive factories, power plants and the aviation sector an incentive to reduce their emissions.

The EU ETS was set up in 2005. It covers the stationary energy sector such as carbon-intensive factories and fossil fuel power plants and, since 2012, the aviation sector. In 2013 Switzerland started its own ETS, which was only compulsory for the stationary energy sector.  Now that it has been linked to the EU's system, the Swiss ETS also includes the aviation sector and fossil fuel power plants. 

Swiss companies gain access to the European market

In January 2016, Switzerland and the EU concluded negotiations on linking their emissions trading systems. The agreement entered into force on 1 January 2020. The agreement strengthens emissions trading as a key climate policy instrument as well as Switzerland's carbon market.  It means that Swiss and European emission allowances are mutually recognised, and it gives Swiss companies access to the much larger EU emissions trading market.  Linking the two ETS is also expected to align the price of emission allowances, which will level the playing field for Swiss and European companies.

Emissions trading: combating climate change

Emission allowances entitle the holder to emit the equivalent of one tonne of CO₂. This applies to both the Swiss and the EU ETS.  ETS work on the cap and trade principle.  Companies or aircraft operators taking part in the Swiss ETS are allocated a certain number of carbon allowances free of charge. If they emit more CO₂ equivalents than their annual entitlement, they have to buy additional emission allowances on the market to make up the shortfall. If they emit less however, they can sell (trade) these unused allowances. The total stock of allowances (cap) goes down each year.

Chronology

2021

• Proposal to revise the EU ETS ("Fit-for-55" package) (14 July)

2020

• Entry into force of the agreement (1^st January)

2019

• Approval by Parliament (23 March)

2017

• Signing of the agreement (23 November)