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Summaries of EU Legislation

Agreement between the EU and Switzerland on the greenhouse gas emissions trading system (ETS)

 

SUMMARY OF:

Agreement between the EU and Swiss Confederation on the linking of their greenhouse gas emissions trading systems

Decision (EU) 2017/2240 on the signing and provisional application of the agreement between the EU and the Swiss Confederation on the linking of their greenhouse gas emissions trading systems

Decision (EU) 2018/219 on the conclusion of the agreement between the EU and the Swiss Confederation on the linking of their greenhouse gas emissions trading systems

WHAT IS THE AIM OF THE AGREEMENT?

  • The agreement aims to link the EU’s emissions trading system (EU ETS) with Switzerland’s ETS (CHETS). The EU considers its emissions trading system (ETS) to be a policy tool which cost-effectively reduces greenhouse gas emissions. Linking emissions trading systems to enable the trade of emission allowances between systems will help build a robust international carbon emission market and further reinforce the emission-reduction efforts of the parties who have linked their systems, thus contributing also towards the objectives of the Paris agreement on climate change.
  • The linking of the two systems will only become fully operational once the Switzerland has brought into force all the requisite rules in its national legislation, notably on extending its ETS to aviation. However, under the terms of this agreement, the Joint Committee (JC) it set up started functioning from the signing of the agreement (November 2017) in order to ensure coordination between the parties, including on developments regarding the entry into force of the relevant Swiss rules.

KEY POINTS

Cap and trade: how the EU ETS works

  • The EU ETS, set up by Directive 2003/87/EC, works on the ‘cap and trade’ principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by power plants and industrial installations covered by the system. The cap is reduced over time so that total emissions fall.
  • Besides stationary installations, the EU ETS applies to all flights between airports in the EU and the European Economic Area.
  • Within the cap, companies receive or buy emission allowances* which they can then trade with one another as needed. Before 2021 they could also use limited amounts of international credits from emission-saving projects around the world for compliance with the system. The limit on the total number of allowances available ensures that they retain their value.
  • Each year a company must hand over enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances.
  • Trading brings flexibility that ensures emissions are cut where it is most cost-effective. It also promotes investment in clean, low-carbon technologies.

EU-Swiss agreement

  • The agreement sets out the key objectives and principles, as well as the institutional structure, for linking the EU and Swiss emissions trading systems.
  • Once the link between the EU ETS and the CH ETS becomes operational, emission allowances that originate from one system are eligible for compliance with the other system.

Essential criteria

  • To ensure the 2 systems are compatible, certain essential criteria, laid down in an annex to the agreement, must be met. These criteria largely reflect the provisions of the EU ETS legislation or its implementing acts. Either system can adopt rules that are more stringent than the essential criteria.
  • The agreement allows for the possibility of future legislative developments in the linked systems without the need for substantial renegotiation as long as the systems continue to meet the essential criteria.

Information sharing and coordination

The agreement establishes a process for information sharing and coordination in areas of relevance. This is to ensure its proper implementation and the ongoing integrity of the linked systems. This process permits the parties to keep each other informed of relevant legislative developments.

Aviation

  • The agreement clarifies that Switzerland will mirror the EU ETS provisions on aviation in the CH ETS for the linking of the two emissions trading systems to enter into force.
  • Aviation operators will be administered by an EEA state or Switzerland under the ‘one-stop shop’ approach. This means that a single authority takes responsibility for the implementation of the 2 systems so that operators will only have to deal with one authority under the linked system.
  • The special situation of the bi-national Basel airport is addressed to avoid double-counting, should Switzerland reach a bilateral agreement on the coverage of activities from Basel airport.

Joint Committee

The agreement establishes a JC as its main steering structure. The JC:

  • comprises representatives of both parties and is responsible for the administration and proper implementation of the agreement;
  • plays a key role in the information sharing and coordination process, as well as in assessing whether the parties continue to meet the essential criteria;
  • can propose changes to articles of the agreement and make amendments to the annexes;
  • became functional from the date of signature of the agreement under the terms of the agreement on the provisional application of certain articles.

Dispute-settlement mechanism

Disputes on the interpretation or application of the agreement can be referred by either party to the JC for resolution. Where the JC is unsuccessful in settling the dispute within 6 months, it can be referred to the Permanent Court of Arbitration at the request of either party.

Technical rules

In addition to the principles, objectives and institutional arrangements, the agreement contains technical provisions governing the operation of registries, accounting, auctioning, sensitive information and security.

DATE OF ENTRY INTO FORCE

The agreement entered into force on 1 January 2020.

BACKGROUND

For more information see:

KEY TERMS

Emission allowance: an allowance to emit 1 tonne of carbon dioxide equivalent during a specified period, issued by the EU ETS or the CH ETS.

MAIN DOCUMENTS

Agreement between the European Union and the Swiss Confederation on the linking of their greenhouse gas emissions trading systems (OJ L 322, 7.12.2017, pp. 3-26)

Council Decision (EU) 2017/2240 of 10 November 2017 on the signing, on behalf of the Union, and provisional application of the Agreement between the European Union and the Swiss Confederation on the linking of their greenhouse gas emissions trading systems (OJ L 322, 7.12.2017, pp. 1-2)

Council Decision (EU) 2018/219 of 23 January 2018 on the conclusion of the Agreement between the European Union and the Swiss Confederation on the linking of their greenhouse gas emissions trading systems (OJ L 43, 16.2.2018, pp. 1-2)

RELATED DOCUMENTS

Notice concerning the entry into force of the Agreement between the European Union and the Swiss Confederation on the linking of their greenhouse gas emissions trading systems (OJ L 330, 20.12.2019, p. 1)

Council Decision (EU) 2018/1279 of 18 September 2018 on the position to be taken on behalf of the European Union within the Joint Committee established by the Agreement between the European Union and the Swiss Confederation on the linking of their greenhouse gas emissions trading systems regarding the adoption of its Rules of Procedure (OJ L 239, 24.9.2018, pp. 8-13)

Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (OJ L 275, 25.10.2003, pp. 32-46)

Successive amendments to Directive 2003/87/EC have been incorporated in the original text. This consolidated version is of documentary value only.

Council Decision (EU) 2015/1339 of 13 July 2015 on the conclusion, on behalf of the European Union, of the Doha Amendment to the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfilment of commitments thereunder (OJ L 207, 4.8.2015, pp. 1-5)

Doha Amendment to the Kyoto Protocol (OJ L 207, 4.8.2015, pp. 6-14)

United Nations Framework Convention on Climate Change (OJ L 33, 7.2.1994, pp. 13-28)

Paris Agreement (OJ L 282, 19.10.2016, pp. 4-18)

Council Decision (EU) 2016/1841 of 5 October 2016 on the conclusion, on behalf of the European Union, of the Paris Agreement adopted under the United Nations Framework Convention on Climate Change (OJ L 282, 19.10.2016, pp. 1-3)

last update 17.01.2020

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