Emissions trading scheme for installation operators

The emissions trading scheme (ETS) limits the emissions from the most greenhouse gas-intensive industrial installations. For this purpose, the absolute available quantity of emission allowances, and therefore a maximum for the emissions of all ETS participants, is defined in advance. Every ETS participant is allocated a certain quantity of emission allowances. If its emissions are lower, it can sell surplus emission allowances, in the opposite case it must buy emission allowances.

Information for affected companies

Further information about the rights and obligations of installation operators which carry out an activity subject to the emissions trading scheme can be found under “Further information” at the end of the page.

Switzerland’s emissions trading scheme

Switzerland introduced the emissions trading scheme (ETS) for industrial installations in its current form in 2013, on the basis of the EU regulation. The rules are defined in advance each time for a set period – a “trading period”. The first trading period was from 2013 to 2020. With a partial amendment to the CO2 legislation, the Swiss Parliament extended emissions trading. The next 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 scheme

It is compulsory for installation operators with high greenhouse gas emissions to participate in the ETS (ETS participants). Activities which generally cause high to very emissions are listed in the CO2 Ordinance (Appendix 6). Any company which carries out such an activity must participate in the Swiss emissions trading scheme. Sectors affected include cement, chemicals and pharmaceuticals, refineries, paper, district heating and steel.

If absolute emissions at a production site consistently fall below 25,000 tonnes of CO2 equivalents per year, the operator of the installations may apply for an exemption from emissions trading (“opt-out”). 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.

It is also possible to participate voluntarily in the ETS (“opt-in”). However, certain conditions defined in the CO2 Ordinance must then be met.

Any company participating in the ETS with its installations will be reimbursed the CO2 levy on the fuels it uses, upon application.

Allocation of emission allowances

The FOEN calculates the quantity of emission rights each individual ETS participant receives free of charge from the Confederation. This allowance is determined using benchmarks. Most of the benchmarks are defined as a number of emission allowances per tonne of product or terajoule of heat used, and correspond to the emissions of a greenhouse gas-efficient production facility. The ETS participant is therefore allocated emission allowances free of charge depending on its production. The FOEN calculations also take into account the risk of relocating production abroad because of the increased costs of emissions trading (“carbon leakage”). The quantity of the allowance is independent of the actual use of energy sources or materials and therefore of the greenhouse gas efficiency of production. 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 emission allowances.

Absolute quantity of emission allowances

The Federal Council has determined the absolute quantity of emission allowances in Switzerland’s ETS in advance, based on historical data from the years 2008–2012. One emission allowance authorises the emission of one tonne CO2 equivalent. The absolute quantity of emission allowances therefore corresponds to the maximum greenhouse gas emissions of all ETS participants and has been reduced annually by 1.74% of the original baseline since 2010 to around 4.9 million tonnes CO2 equivalent in the year 2020. From 2021, the annual reduction is 2.2% of the 2010 baseline.

Of the absolute quantity of these emission allowances, 95% is available for allocation to the operators of installations participating in the ETS from the first year of a trading period onwards (2013–2020 or 2021–2030). If the sum of the calculated free-of-charge allocations exceeds this quantity, the allocation to all participants are reduced linearly by the same factor (cross-sectoral correction factor). However, the reduction target across the entire ETS is not thereby increased, since this target is determined solely by the absolute quantity and the reduction path of 1.74%, now 2.2%, of the initial quantity per annum.

The remaining 5% of the absolute quantity is reserved for new ETS participants and those with significant production increases. Added to this are emission allowances which are no longer allocated because of lower levels of production or the closure of installations. Any cross-sectoral correction factor is also applied to these allocations so that all ETS participants receive equal treatment.

The FOEN auctions off unallocated emission allowances via the Swiss Emissions Trading Registry.

Market stabilisation mechanism

With the new market stabilisation mechanism introduced in 2022, the quantity of emission allowances to be auctioned is adjusted in a predefined mechanism. This is done to prevent too many emission allowances from being available on the market.

The auction quantity corresponds to the quantity of emission allowances for installations not allocated free of charge in the corresponding year. Under the market stabilisation mechanism, this quantity is reduced by half if a certain threshold is exceeded. The threshold is calculated on the basis of the quantity of emission allowances for installations in circulation and the maximum quantity of emission allowances for installations available in the previous year (previous year’s cap). If the quantity in circulation is more than half of the previous year's cap, the auction quantity is reduced by half and cancelled at the end of the commitment period. The quantity in circulation corresponds to the supply of emission allowances less the demand for emission allowances. The quantity in circulation 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	2024	2025
Supply (a+b+c)	46 265 743
a) Carryover of emission allowances 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
c) Emission allowances for installations auctioned, 2013 to previous year	3 483 767
Demand (d-e)	42 013 217
d) Relevant greenhouse gas emissions from installations, 2013 to the previous year	43 943 576
e) Emission-reduction certificates surrendered, 2013-2020	1 931 050
Quantity in circulation (supply less demand)	4 252 526
50% of previous year’s cap	2 389 124	2 323 750	2 258 376	2 193 002
Estimated Quantity of emission allowances for installations not allocated free of charge in the corresponding year (auction quantity WITHOUT reduction)	460’000
Is the condition met for reducing the auction quantity? (quantity in circulation > 50% of previous year’s cap)	yes
Estimated Auction quantity (50% of emission allowances for installations not allocated free of charge in the corresponding year)	230’000

Surrender of emission allowances for annual emissions

All ETS participants must report their annual greenhouse gas emissions to the Confederation. Because an emission allowance always corresponds to one tonne CO2 equivalent, an ETS participant always has to surrender a number of emission allowances to the Confederation which corresponds exactly to the greenhouse gases emitted in tonnes of CO2 equivalents.

The table below provides an overview of the absolute quantity of emission allowances (“cap”), the reserve and the originally calculated allocation.

	Cap	5% Reserve	95% of the cap	Calculated allocation (without CSCF)	Cross-sectoral correction factor (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	4’255'255	212'763	4'042'493	4'258'220	-5.07%