On 1 January 2025, Switzerland revised its CO2 Act, introducing reforms to its ETS, and aligning it with the 2023 reforms of the EU ETS. These changes follow a series of legislative developments and public consultations.
The Swiss ETS, which covers the industry, power, and aviation sectors, has been linked with the EU ETS since January 2020. To ensure compatibility, the two systems must adhere to similar rules. The recent revision of the EU ETS, that came into force in 2023, prompted this latest reform.
The revised CO2 Act, approved by the Swiss Parliament in March 2024, introduces several important modifications. The new legislation sets national and sectoral emissions targets for the 2025-2030 period and closely aligns the Swiss ETS with the revised EU ETS. It applies identical linear reduction factors as the EU ETS for the period 2024-2030. Starting in 2024, the effective linear reduction factor for stationary installations and aviation is 4.3%, with a further increase to 4.4% from 2028. Additionally, the reform phases out free allocation in the aviation sector by 2026, aligning with EU ETS regulations. The reform also introduces provisions for accounting CO2 capture and storage and, under certain conditions, the inclusion of foreign biogas use in the ETS.
The Swiss government decided against introducing a parallel Carbon Border Adjustment Mechanism (CBAM) to the EU’s, a decision outlined in a government report published in June 2023. The report cited regulatory and trade policy risks associated with adopting a standalone CBAM. Despite not adopting a CBAM, the Swiss ETS will gradually phase out free allocations in the industry sector, mirroring the EU ETS approach for sectors covered by CBAM. The revision of the Swiss CO2 Act partially provides the legal framework for this gradual phase-out.
In June 2021, an earlier revision attempt failed in a referendum, resulting in an extension of the existing CO2 Act to 2024 as an interim measure. However, in March 2024, the Parliament approved the new CO2 Act for 2025-2030. To support its implementation, the government prepared a CO2 Ordinance, which underwent public consultation between July and October 2024. The ordinance is set to take effect in spring 2025, with retroactive application.
