The EU and Switzerland want to adjust the CO2 emissions trading system to provide stronger incentives to reduce greenhouse gas emissions. The EU is also introducing a CO2 border adjustment mechanism - Switzerland is not.
The EU is further developing its Emissions Trading System (ETS) to achieve greater reductions in greenhouse gas emissions from industry. In addition, it is introducing a CO2 border adjustment mechanism (CBAM) to reduce the risk of production relocations to third countries with less stringent environmental regulations. Switzerland is refraining from doing so for the time being. See also the report «Impact of CO2 Border Adjustment Mechanisms in Switzerland.»
Taxes will be gradually levied on imports from 2026 onwards
The EU CBAM will be the first system of its kind in the world. Initially, the mechanism will apply to imports into the EU of goods from the iron and steel, aluminum, cement, fertilizer, hydrogen, and electricity sectors. After a test phase starting in October 2023, levies will gradually be imposed on imports from 2026 to compensate for differences in CO2 pricing between the EU and other countries at the border. Full implementation will take place from 2034.
Introduction of a CBAM means a system change
Currently, the EU and Switzerland allocate free emission allowances to energy-intensive industrial plants in the linked emissions trading systems. The decision to introduce a CBAM therefore represents a system change. «Many details on the actual enforcement are still pending, so that neither stable framework conditions are foreseeable nor estimates on the additional administrative burden for Swiss companies are possible», the Federal Council argues. And he continues, «A CBAM would also benefit only a few emission-intensive industrial plants in Switzerland but would be detrimental to the rest of the economy. There is no obligation for Switzerland to introduce a CBAM in the context of the ETS agreement. The EU's CBAM is also criticized within the World Trade Organization (WTO) as a discriminatory and inadmissible measure. »
Federal Council recommends against CBAM at present
The Federal Council has analyzed the effects of CO2 border adjustment mechanisms on Switzerland from an economic, ecological, and foreign trade perspective. Due to the regulatory and trade policy risks, it recommends refraining from introducing a CBAM in step with the EU at present. Switzerland would thus retain degrees of freedom in the medium term, while the EU CBAM and its scope are under development, he explains. In mid-2026, the need for action could be reviewed based on the interim balance sheet of the EU available at that time.
Emissions trading system to be adapted in the meantime
However, in its report in fulfillment of postulate 20.3933, the Federal Council clearly states that it wants to adapt Switzerland's ETS in step with the EU so that the EU and Swiss ETSs can remain linked. This is also a prerequisite for Swiss goods to be exempt from the EU CBAM.
