Emissions Trading System for installation operators (ETS Installations)

The Emissions Trading System (ETS) limits the emissions from the most greenhouse gas-intensive industrial installations. The absolute available quantity of emission allowances, and therefore a maximum for the emissions of all ETS participants, is defined in advance. Each ETS participant is allocated a certain number of emission allowances. If its emissions are lower than this allowed amount, it can sell surplus emission allowances; if they are higher, the participant must buy emission allowances.

Switzerland introduced the Emissions Trading System (ETS) for industrial installations in its current form in 2013, on the basis of EU rules. The ETS rules are defined in advance of a set period known as a trading period. The first trading period was from 2013 to 2020. The current trading period covers the years 2021 to 2030. Switzerland’s ETS and that of the EU have been linked since 1 January 2020. Swiss ETS participants are therefore on a level playing field with their European competitors with regard to the regulation of greenhouse gas emissions.

Participation in the Emissions Trading System

It is compulsory for installation operators with high greenhouse gas emissions to participate in the ETS. Activities that generally cause high to very high emissions are listed in the CO₂ Ordinance (Annex 6). Sectors affected include cement, chemicals and pharmaceuticals, refineries, paper, district heating and steel. These industries are required to participate in the ETS.

Opting out

If absolute emissions at a production site consistently fall below 25,000 tonnes of CO₂ equivalents (CO2-eq)per year, the operator of the installations may apply to opt out of the ETS. Separately from this, research, development and testing facilities at a site and installations whose main purpose is special waste management can be exempted from emissions trading.

Opting in

Companies can also participate voluntarily in the ETS (opt in). To do so, the installations operating at the site must have a total rated thermal input of at least 10MW.

Any company participating in the ETS with its installations can apply to the Federal Office for Customs and Border Security for a reimbursement of the CO₂ levy on the fuels it uses.

Federal Office for Customs and Border Security: CO₂ levy publications

(available in German, French and Italian)

Allocation of emission allowances

The FOEN uses a series of benchmarks to calculate the number of emission allowances each individual ETS participant receives free of charge from the Confederation. The benchmarks are generally defined as the number of emission allowances per tonne of product or terajoule of heat used in a greenhouse gas efficient production facility. The ETS participant is thus allocated free emission allowances according to its production volume or amount of heat used. The number of allowances is independent of the greenhouse gas efficiency of the participant’s production, i.e. is not determined by the actual volume of greenhouse gas emissions. The FOEN reduces the allocations if there is no risk of production being relocated abroad (‘carbon leakage’). The incentive for ETS participants is therefore to reduce their greenhouse gas emissions so that they can either sell superfluous emission allowances or will have to buy fewer additional ones.

Surrendering emission allowances

All ETS participants are required to monitor their annual greenhouse gas emissions. One emission allowance must be surrendered for each tonne of CO2-eq emitted.

Absolute number of emission allowances

The Federal Council places a cap on the total number of emission allowances in Switzerland’s ETS based on historical data from the years 2008–12. One emission allowance permits exactly one tonne CO2-eq to be emitted. The cap was set at around 5.6 million tonnes CO2-eq in 2013, declining to around 4 million tonnes by 2025. The cap was reduced annually at a rate of 1.74% of the original 2010 baseline to around 4.9 million tonnes CO2-eq in 2020; from 2021 to 2024, the annual reduction rate was 2.2% of the 2010 baseline, rising to 4.3% in 2025 to 2027 and 4.4% in 2028 to 2030.

Of the capped amount, 95% is available for allocation to the operators of installations participating in the ETS from the first year of a trading period onwards (2013–20 or 2021–30). If the total free allocation of allowances exceeds this quantity, allocations to all participants are reduced linearly by the same factor. This is known as the cross-sectoral correction factor (CSCF).

The remaining 5% of the cap is reserved for new ETS participants and those with significant production increases (reserve). In addition there are emission allowances that are no longer allocated because of lower levels of production or the closure of installations. The CSCF is also applied to allocations for new ETS participants, so that everyone receives equal treatment. If these emission allowances are not needed, they can be used to limit the CSCF to 5% for all ETS participants.

The FOEN auctions off the remaining unallocated emission allowances via the Swiss Emissions Trading Registry, whereby the market stabilisation mechanism is applied (see below).

The table below provides an overview of the cap, the reserve, the CSCF and the total sum of allocation rights:
	Cap	5% reserve	95% of cap	Allocation calculated (without CSCF)	CSCF
2013	5 632 864	281 643	5 351 224	5 356 061	-0.09%
2014	5 529 455	276 473	5 252 981	5 330 420	-1.45%
2015	5 426 045	271 302	5 154 743	5 304 741	-2.83%
2016	5 322 635	266 132	5 056 502	5 279 100	-4.22%
2017	5 219 225	260 961	4 958 263	5 253 458	-5.62%
2018	5 115 815	255 791	4 860 022	5 227 813	-7.04%
2019	5 012 405	250 620	4 761 788	5 202 134	-8.46%
2020	4 908 996	245 450	4 663 548	5 176 493	-9.91%
2021	4 778 248	238 912	4 539 335	4 887 777	-7.13%
2022	4 647 500	232 375	4 415 125	4 258 220	n/a
2023	4 516 751	225 838	4 290 914	4 258 220	n/a
2024	4 386 003	219 300	4 166 703	4 258 220	-2.15%
2025	4 005 645	200 282	3 805 363	4 258 220	-10.63%

Market stabilisation mechanism

The number of emission allowances to be auctioned is adjusted in a predefined mechanism. Introduced in 2022, this mechanism is designed to prevent too many emission allowances from being available on the market.

The number of allowances available for auction is the number not allocated to installations free of charge in the corresponding year. Under the market stabilisation mechanism, this number is reduced by half if a certain threshold is exceeded. The threshold is calculated on the basis of the number of emission allowances for installations in circulation and the previous year’s cap. If the number in circulation is more than half of the previous year's cap, the number available for auction is reduced by half and cancelled at the end of the commitment period. The number in circulation corresponds to the supply of emission allowances less the demand for emission allowances. This is calculated in accordance with the provisions of Annex 8 No 2 of the CO₂ Ordinance.

	Market stabilisation mechanism
	2022 (as at 17.10.2022)	2023 (as at 31.08.2023)	2024 (as at 28.06.2024)	2025
Supply (a+b+c)	46 265 743	50 774 621	55 037 511
a) Emission allowances carried over from 2008–12	157 741	157 741	157 741	157 741
b) Emission allowances for installations allocated free of charge, 2013 to previous year	42 624 235	46 720 415	50 723 855
c) Emission allowances for installations auctioned, 2013 to previous year	3 483 767	3 896 465	4 155 915
Demand (d minus e)	42 013 217	46 353 324	50 274 588
d) Relevant greenhouse gas emissions from installations, 2013 to the previous year	43 943 576	48 284 374	52 205 638
e) Emission reduction certificates surrendered, 2013–20	1 931 050	1 931 050	1 931 050
Number in circulation (supply less demand)	4 252 526	4 421 297	4 762 923
50% of previous year’s cap	2 389 124	2 323 750	2 258 376	2 193 002
Estimated number of emission allowances for installations not allocated free of charge in the corresponding year (number auctioned WITHOUT reduction)	460 000	580 000	820 000
Is the condition met for reducing the auction number? (number in circulation > 50% of previous year’s cap)	yes	yes	yes
Estimated auction number (50% of emission allowances for installations not allocated free of charge in the corresponding year)	230 000	290 000	410 000