Following final regulatory changes in the design of the Swiss ETS, a link between the Swiss and EU ETSs will take effect on 1 January 2020.
The link caps a 10-year process of negotiations and agreement on regulatory alignment. Formal negotiations began in December 2010, culminating in the conclusion of a linking agreement in late 2017. The EU and Swiss parliaments gave their approval in the intervening years, but necessary regulatory changes were still pending on the Swiss side. With the final hurdles now having been cleared, both sides announced on 12 December 2019 that the link will become operational in January 2020, meaning covered entities in both systems will be able to use allowances from either ETS for compliance.
As part of this final step and to further align program design, the Swiss CO2 Act and CO2 Ordinance had to be adapted to the EU ETS legislative framework. The amendment of the CO2 Ordinance was passed on 13 November 2019 and included the broadening of the Swiss ETS scope to the aviation and power sectors. Nevertheless, some differences in system design and operations will remain. For example, the Swiss ETS will not adopt the Market Stability Reserve or a similar quantity-control mechanism. The two systems will also run separate auctions due to legal restrictions on the EU’s ability to auction Swiss allowances.