Proposal for a COUNCIL DECISION on the conclusion, on behalf of the European Union, of an Agreement between the European Union and the Swiss Confederation on the Linking of their Greenhouse Gas Emissions Trading Systems
1. The European Commission is proposing two related Council Decisions: one is to sign and the other is to conclude, on behalf of the European Union (EU), an Agreement between the EU and Swiss Confederation to link greenhouse gas Emission Trading Systems (ETSs). The European Commission’s proposals, and their annexes, are attached alongside this Explanatory Memorandum (EM). The proposals are straightforward and will give permission to the European Commission to sign and conclude the Agreement which will link the ETSs. The EM provided by the EU outlines how the Swiss ETS meets the basic conditions for linking, the legal basis for this linking, and an overview of the Agreement. The proposals’ annexes contain the Agreement.
2. The development of a well-functioning international carbon market through bottom-up linking of ETSs has been a long term policy goal of the UK, the EU and the international community; notably, as a means to achieve climate objectives, including under the Paris Agreement.
3. The EU ETS has been operating for more than a decade. It was the world’s first major carbon market and remains the biggest one. A cap is set on the total amount of certain greenhouse gases that can be emitted by installations and aviation operators covered by the system. The cap is reduced over time so that the total emissions fall. Within the cap, companies receive or buy emissions allowances which they can trade with one another on the secondary market as needed. After each year a company must surrender enough allowances to cover all its emissions, otherwise enforcement action is taken. In this way the EU ETS both sets a target to reduce the emissions from the EU over time and aims to effect change by incentivising a shift towards low carbon development.