Emissions Trading

To a certain degree, industrialised countries can also meet their emission reductions abroad through the use of flexible mechanisms. This takes place, in addition to the Clean Development Mechanism (CDM) and Joint Implementation (JI), through a trade in emission allowances. This kind of trade between countries has been made possible by the Kyoto Protocol. These countries are also allowed to facilitate trade between companies, as is happening in Europe and in Switzerland.  

Emissions Trading System according to the Kyoto Protocol

The prevailing arrangement until 2012 functions as follows: The UNFCCC Secretariat issues emissions allowances – so-called Assigned Amount Units (AAUs) to countries based on their emission reduction obligation according to the Kyoto Protocol. At the end of 2012, the countries have to submit emission credits for the emissions effectively emitted by them. Emission allowances not used to cover a country's domestic emissions can be traded (Cap&Trade). In the case of exceedance, countries have 100 days for late submission of the missing emission credits. If this does not take place, the country must submit the credits in the next commitment period (with a factor of 1.3) and may not sell any more credits (provided that the Kyoto Protocol is continued in its current form).

Countries have the option to allocate their emission allowances to domestic private enterprises with obligations, thereby qualifying these for direct participation in the Emissions Trading System. Emission allowances can be purchased directly on the international market. Certificates from the CDM- and JI- Projects (CERs or ERUs) are likewise tradable.

Any country wanting to participate in the project-based mechanisms and international Emissions Trading System must have an electronic national register with an account for each market participant at their disposal.

Depending on the future of the climate change regime after 2012, it is possible that the countries may indeed remain committed to reduction targets, but that these would not however lead to the allocation of credits or, where emissions credits are exceeded, to sanctions. This would mean that the international emissions trading based on the Kyoto Protocol would be waived in its present form.

Emissions trading systems in the EU and in Switzerland

There are also Cap&Trade Systems here that are not directly prescribed by the Kyoto Protocol, such as e.g. the EU Emissions Trading Scheme (EU-EHS), or the Swiss Emissions Trading Scheme (CH-EHS) in accordance with the CO2 Act. Here businesses submit to the Emissions Trading Scheme on a voluntary or obligatory basis depending on their characteristics, and receive a certain allocated amount (Cap) of emissions allowances from the state. These allowances can only be traded within this scheme. Businesses can however in turn partly meet their obligations with emission reduction certificates from CDM or JI projects. The EU ETS will continue as a tool for emissions reductions for fixed installations and air traffic regardless of the outcome in Copenhagen. Another possibility is further international development through increased interconnection of several such emissions trading schemes. The Federal Council aims to combine the Swiss solution with the EU Emissions Trading Scheme.

Further information

Federal Office for the Environment (FOEN)