Green light for the agreement linking the EU and Swiss emissions trading systems
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On 10 November, the Council adopted a decision authorising the signing, on behalf of the EU, of an agreement between the European Union and the Swiss Confederation, linking their respective emissions trading systems (ETS). The signing of the agreement is planned to take place soon. The Council will now forward the text of the agreement to the European Parliament for its consent in order to conclude the agreement.
The ETS is one of the main tools for cost effectively reducing greenhouse gas emissions, in particular from energy-intensive industries and power plants. This agreement will be mutually beneficial for the EU and the Swiss Confederation, allowing both parties to attain their emissions reduction targets, especially commitments taken under the Paris Agreement.
This linking of the two ETS's will help strengthen the functioning of the respective systems, enhance carbon pricing and ultimately create a solid international carbon market.
"I want to thank Switzerland and all EU member states for their confidence that mutual cooperation will make our emissions trading systems stronger and more cost effective. Reaching our Paris climate goals is a shared objective - no country can fight climate change on its own. By enlarging the emissions trading market, we are creating a solid path towards a cleaner future."
Siim Kiisler, Minister for the Environment of the Republic of Estonia
The EU ETS and the Swiss ETS share very similar structures and follow the same principles. The current trading period of the two systems covers 2013-2020 and also incorporates a linear reduction factor to annually decrease the quantity of allowances on the market.
The Swiss ETS already meets two of the three fundamental requirements for making this agreement a reality. Firstly, large and energy-intensive installations under the Swiss ETS have been obliged to comply with the system since 2013 and secondly, it has an absolute emissions cap.
The third condition applies to aviation activities which are not yet part of the Swiss ETS. Switzerland is currently working on measures to extend its system to this sector. Implementing those rules will be mandatory for the agreement to formally enter into force.
The EU ETS, launched in 2005, is the world's largest cap and trading system. The EU is currently close to finalising its reform for the period 2021-2030. Likewise, a revision is underway for the Swiss ETS. The agreement introduces specific provisions to take the better functioning systems into account for the next phase and ensure future compatibility.
To ensure the effectiveness of the linked systems, the EU and Switzerland will exchange annual reports on the total amount of allowances that belong to the other party but are held in their system.
Timeline and next steps
On 17 December 2010, the Council authorised the European Commission to open negotiations with the Swiss Confederation for this agreement.
Upon the finalisation of negotiations, the Commission submitted proposals on 16 August 2017 for two Council decisions on the signing and provisional application of the agreement and its final conclusion.
As a first step, the Council today adopted the decision on the signing and gave the green light on the text of the agreement. The European Parliament's consent is required before the Council decision on the conclusion of the agreement can be adopted.
The decision on signing and the agreement itself will be published in the Official Journal. Certain parts of it related to the coordination of information and the work of the Committee responsible for the appropriate implementation of the agreement will be applied on a provisional basis.
The entire agreement will enter into force on 1 January of the year following the formal exchange of instruments of ratification by both signatories.