On 14 July 2021, the European Commission adopted a package of proposals to referred as “Fit for 55”. This package aims to align the EU’s climate, energy, land use, transport and taxation policies for reducing net greenhouse gas emissions by at least 55% by 2030.
The key highlights of the package for the business are:
- Phase out free emission allowances for aviation and include shipping emissions in the EU ETS (Emission Trading System)
- Alternative Fuels Infrastructure Regulation requires that aircraft and ships have access to clean electricity supply in major ports and airports
- Maximum limit on the greenhouse gas content of energy used by ships calling at EU ports
- A revision of the Energy Taxation Directive proposes to align the taxation of energy products with EU energy and climate policies
- A new Carbon Border Adjustment Mechanism (CBAM) will put a carbon price on imports of a targeted selection of products to ensure that ambitious climate action in Europe does not lead to ‘carbon leakage’
What is the impact on Swiss business operations?
Swiss companies operating in the EU will also be impacted since they would still need to comply with the CBAM charges and compliance. As per the draft proposal, only EU based entities can register as ‘authorized declarant’. Therefore, entities with operating models involving Swiss principals need to review the form of their presence in the EU.
Swiss businesses managing procurement and distribution should also review the impact on the global procurement and distribution strategy. CBAM incentivizes procurement or manufacturing of specified goods originating in the EU or in countries where carbon emission regulations are already in place. Likewise, CBAM makes it less economical to source specified goods from less sustainability-oriented counties.
Although the draft proposal excludes Swiss exports to the EU from the CBAM scope, there will be an impact on companies with integrated business operations in the EU and for companies importing such covered goods from the EU.
In the detailed Tax News update below, you can find an overview of the scope of CBAM, compliance requirements and action points for the business.