8 minute read 30 Sep 2021
Mountains view at sunset

When will you take the initiative in the green economy?

By Nathan Richards

Partner, EMEIA Tax Centre, Transfer Pricing and Operating Model Effectiveness | EMEIA

Designs and transforms to sustainable operating models. Green tax element evaluation and planning. BEPS-aligned operating model solutions. Transfer pricing planning and controversy management.

8 minute read 30 Sep 2021

Organizations should start preparing for Switzerland’s new regulatory landscape – and a more climate-conscious future.

In brief
  • Some environmental protection instruments expire at the end of 2021
  • Switzerland has a long history of incentivizing environmentally friendly behavior
  • New environmental initiatives and counterproposals are in the pipeline
  • Organizations should prepare for shifts in the regulatory landscape now

Swiss voters may have rejected the revised CO2 Act in June 2020, but Switzerland’s legislative landscape around environmental issues remains firmly in motion. Provisions affect a wide range of industries through direct and indirect business impacts, including increased compliance, higher import costs, or effects on competitiveness when supplying Swiss origin goods to the EU.

Expiry date


Several carbon reduction instruments will run out at the end of the year.

With the CO2 Act still in place, unchanged, Switzerland no longer has a measurable carbon reduction target. What’s more, several instruments will expire at the end of 2021. It’s now up to the Swiss government to determine which regulations can be extended directly, and to re-negotiate policy targets and instruments for subsequent years. Although it may seem a setback for Switzerland – especially compared to the progress of other countries and especially the EU on sustainability policies – Switzerland remains a frontrunner with its environmental taxes at the federal, cantonal, and municipal level. So-called “green taxes” are likely to play a key role in incentivizing positive environmental behaviors and discouraging negative impacts.

Whatever happens next in Switzerland, companies should prepare for change. An overview of existing and upcoming legislation is essential in informing a forward-looking business strategy and balancing the potential risks and opportunities appropriately. In this article, we explore the current regulatory landscape, anticipated development – and what companies can do now to prepare their business for the green economy.

(Chapter breaker)

Chapter 1

Current regulatory environment

How Switzerland tackles environmental issues at the federal level

The Swiss government has traditionally focused on water, air and soil protection, although the current environmental policy has a wider scope and includes natural resources in general.

The Environmental Protection Act (EPA), the cornerstone of Swiss environmental legislation, includes incentive taxes which have been added in the course of multiple revisions since the legislation was passed almost four decades ago. The EPA is intended to protect people, animals and plants, their biological communities and habitats against harmful effects or nuisances and to preserve the natural foundations of life sustainably, in particular biological diversity and the fertility of the soil.

Below, we shine the spotlight on the most important federal provisions governing key environmental aspects at present:

  • Ambient air
  • Climate
  • Energy
  • Waste, soil and chemicals

These are complemented by additional measures at the cantonal or municipal levels (not discussed here).

Ambient air is protected by ordinances and incentivized by tax.

Switzerland has comprehensive legislation on ambient air, with measures to limit emissions directly at the source or prevent them from spreading. Notably, the Air Pollution Control Ordinance (OAPC) regulates the precautionary emission limits of installations and the procedure in the case of excessive ambient air pollution. This legislation is supported by three key ordinances containing economic incentives to reduce volatile organic compounds and sulfur:

  • Ordinance on the Incentive Tax on Volatile Organic Compounds (OVOC)
  • Ordinance on Extra Light Fuel Oil (ELHOO)
  • Ordinance on Petrol and Diesel with high sulfur content (PDSO)

Alongside the existing incentives, new transport taxes were introduced in 2020 to encourage emissions reductions in the transport sector. These include automobile duty for passenger cars, heavy vehicle charges, as well as a national highway charge.

CO2 tax

CHF 120

Per ton of CO2.

A CO2 tax of CHF 96 per ton of CO2 is already levied on all thermal fossil fuels, such as heating oil, natural gas, coal, petroleum coke and other fossil combustibles used to generate heat, produce electricity in thermal plants or operate combined heat and power plants. The tax rate will rise to CHF 120 per ton of CO2 in 2022. However, the rate cannot be increased for subsequent years due to the rejection of the revised CO2 Act. Exemption is still possible upon request until the end of 2021, when the current CO2 Act term will end. In other words, companies that are heavily affected by the CO2 levy can proactively pledge their commitment to the Swiss government to reduce their CO2 emissions. If this measure is not extended, the CO2 tax could directly affect the bottom-line of businesses.

Until 2022, importers of petrol and diesel are required to partly compensate their CO2 emissions from fuels through climate measures.

Organizations already required to participate in emissions trading are exempt from the CO2 levy. Since 2020, the Swiss Emissions Trading System (ETS) has been linked to the EU ETS. Access to the large EU emissions trading market enables greater flexibility in meeting CO2 targets.

A Technology Fund has been created from the revenue of the CO2 levy to support climate-friendly innovations by Swiss companies. Swiss SMEs and start-ups can apply if they have developed a product which substantially reduces greenhouse gas emissions.

Grid surcharge


cents per kilowatt hour

Switzerland’s Energy Strategy 2050 aims to reduce energy consumption, increase energy efficiency, promote the use of renewable energy, and gradually withdraw from the use of nuclear energy.

Since 2018, Swiss electricity consumers have paid a grid surcharge of 2.3 cents per kilowatt hour, which is used to finance various measures.

Operators of installations for the production of renewable electricity can apply for remuneration as well as investment funds. There are also funding support schemes for renewable energy at a cantonal level; these may contain specific provisions.

The newly revised Energy Act provides different tax incentives for the renovation of buildings, i.e., deduction of investment and dismantling costs from income taxes. These measures aim to promote overall renovations over partial renovations. At the same time, the Buildings Program – which runs until 2025 – supports the transition to renewable energy sources, the efficient use of energy and the renovation of old buildings with subsidies. A few eligibility exceptions apply.

Finally, Switzerland levies a mineral oil tax consisting of:

  • Petroleum excise tax on crude oil, other mineral oils, natural gas, their processed products and engine fuels
  • Petroleum surcharge on engine fuels.

The tax rate depends on the fuel type and use, with relief for agriculture, forestry, professional fishing and licensed transport. Fuels produced from renewable raw materials also benefit from tax breaks.

The principle of self-regulation – a staple in the Swiss regulatory landscape – applies to the handling of chemicals.

Waste, soil and chemicals legislation focuses on environmentally safe waste disposal and addresses polluted sites, soil protection and handling of chemicals.

The Ordinance on the Return, Taking Back and Disposal of Electrical and Electronic Equipment (ORDEE) and the Ordinance on Beverage Containers (BCO) govern the environmentally sound disposal of specific consumer products.  Waste that cannot be recycled must be physically or chemically treated before being placed in licensed landfills only.

Waste and water levies are managed by the cantons or municipalities which impose a charge for the disposal of the waste and the use of public wastewater disposal infrastructure respectively.

The principle of self-regulation – a staple in the Swiss regulatory landscape – applies to the handling of chemicals. Manufacturers and importers must gather enough information to assess their contact with chemicals. In the case of certain chemicals, persons handling them must obtain a special authorization. In extreme cases, chemicals are subject to stricter regulations or are even banned, as is the case, for example, for highly durable chlorofluorocarbons (CFCs).

(Chapter breaker)

Chapter 2

A climate of legislative change

Upcoming initiatives and counterproposals

Environmental topics enjoy a high degree of interest in society and economy in Switzerland, as reflected in popular initiatives past and present. We highlight three initiatives to watch.

The Biodiversity Initiative was launched in March 2019 along with the Landscape Initiative as a dual initiative to promote biodiversity and protect the landscape. The Biodiversity Initiative aims to guarantee the diversity of nature, landscape and architectural heritage. It calls for more financial resources and space for biodiversity. The Landscape Initiative aims to halt the loss of Switzerland’s farmland and sets clear limits on the construction boom outside of building zones. Signature collection was completed in September 2020 and the Federal Council opened the consultation procedure for the indirect counterproposal in March 2021. The Federal Council thus recognizes the urgent need to act against the biodiversity crisis in Switzerland.

The Glacier Initiative, launched in November 2019, calls on the Swiss government to anchor the goals of the Paris Agreement in the Swiss Constitution. The initiative provides the legal basis to move away from fossil fuels and achieve a net zero society. In September 2020, the Federal Council presented its direct counterproposal to the Glacier Initiative, which was submitted to Parliament in August 2021.

Triggered by the ongoing climate crisis, species extinction and pollution we know today, the Environmental Responsibility Initiative was launched in August 2021. The initiative seeks to make environmental protection a number one priority for the Swiss economy and society. Collection of signatures is underway.

It remains to be seen how these initiatives, and counterproposals, are received at the polls. What is clear is that companies will increasingly have to address environmental aspects of how they do business.

(Chapter breaker)

Chapter 3

Ready for what’s next

With legislative change imminent, now’s the time to prepare for a new environment

Significant legislative changes are on the horizon, especially as the CO2 Act is due to expire without any follow-up legislation in place. Businesses should now assess whether they will be affected by changes to exemptions and compliance requirements from 2022 onwards. Otherwise, they risk unwelcome surprises as costs spiral due to new environmental requirements. A forward-looking approach will enable the business to consider future legislation and respond proactively by tweaking the business model where necessary.

It seems likely, for example, that the Swiss government will – at some point – follow the EU’s lead and introduce a Swiss Carbon Border Adjustment Mechanism (CBAM). Swiss exports to the EU are currently outside the scope of the EU draft regulation due to Switzerland’s stringent carbon emission standards. A CBAM, in any form, would significantly impact bottom-line cost for companies whose business relies on importing carbon intensive products from non-EU and EEA countries. Such organizations should analyze the types and natures of imports now so that they can assess the impact and take proactive steps to optimize structures.

Contact us

Interested to know more? Please contact EY Green Taxes team below.
  • Article References

    1. Climate change taxation reforms in Switzerland | CMS Expert Guidesreference link1 (https://cms.law/en/int/expert-guides/cms-expert-guide-to-climate-change-tax-reforms-and-incentives/switzerland)
    2. Rejet de la loi sur le CO2 : les mesures qui expireront ou qui seront limitées à partir du 1er janvier 2022 (admin.ch) (https://www.bafu.admin.ch/bafu/fr/home/themes/climat/droit/totalrevision-co2-gesetz/mesures-qui-expireront.html)
    3. Initiative Biodiversité - Initiative biodiversité (initiative-biodiversite.ch) (https://www.initiative-biodiversite.ch/)
    4. L’initiative biodiversité a abouti (admin.ch) (https://www.bk.admin.ch/bk/fr/home/documentation/communiques.msg-id-80776.html)
    5. Initiative biodiversité : le Conseil fédéral ouvre la consultation sur le contre-projet indirect (admin.ch) (Initiative biodiversité : le Conseil fédéral ouvre la consultation sur le contre-projet indirect (admin.ch)) (https://www.admin.ch/gov/fr/accueil/documentation/communiques.msg-id-82898.html)
    6. Initiative paysage - Initiative paysage (initiative-paysage.ch) (https://www.initiative-paysage.ch/)
    7. Initiative pour la responsabilité environnementale | Signez l'initiative pour la responsabilité environnementale maintenant (responsabilite-environnementale.ch) (https://responsabilite-environnementale.ch/)
    8. WeCollect – Plattform für direkte Demokratie (https://wecollect.ch/fr/projets/initiative-pour-la-responsabilite-environnementale?act&fbclid=IwAR1LpeaNA0oO_rvO82fTI6lA8fukjJu2P-4zkVIlJaKMJiP5UX3eldsZuAY)
    9. Swiss Environmental Law, A brief guide, Federal Office for the Environment (2013), Bern: 36 pp.
    10. Impôts et redevances (admin.ch) (Impôts et redevances (admin.ch) (https://www.ezv.admin.ch/ezv/fr/home/infos-pour-entreprises/impots-et-redevances.html)
    11. Environmental law and practice in Switzerland: overview | Practical Law (thomsonreuters.com) (https://uk.practicallaw.thomsonreuters.com/9-596-3045?contextData=%28sc.Default%29&transitionType=Default&firstPage=true#co_anchor_a895741)
    12. Environmental law in Switzerland - Lexology (https://www.lexology.com/library/detail.aspx?g=c496645b-f6fb-4ed5-aa1e-8033b549ac32)
    13. Principes de la politique environnementale - DETEC (admin.ch) (https://www.uvek.admin.ch/uvek/fr/home/environnement/politique-environnementale.html)
    14. Federal Office for the Environment - Homepage (admin.ch) (https://www.bafu.admin.ch/bafu/en/home.html)
    15. Linking the Swiss and EU emissions trading systems (admin.ch) (https://www.bafu.admin.ch/bafu/en/home/topics/climate/info-specialists/reduction-measures/ets/linking-swiss-eu.html#:~:text=Switzerland%20and%20the%20European%20Union%20%28EU%29%20operate%20separate%2cemissions%20of%20around%2065%20million%20tonnes%20of%20CO2.)
    16. Emissions trading system (ETS) (admin.ch) (https://www.bafu.admin.ch/bafu/en/home/topics/climate/info-specialists/reduction-measures/ets.html)
    17. Energy Strategy 2050 - DETEC (admin.ch) (https://www.uvek.admin.ch/uvek/en/home/energy/energy-strategy-2050.html)
    18. Lenkungsabgabe auf co2 (admin.ch) (https://www.ezv.admin.ch/ezv/de/home/information-firmen/steuern-und-abgaben/einfuhr-in-die-schweiz/lenkungsabgabe-auf-co.html)
    19. Climate protection through innovative technologies (technologyfund.ch) (https://www.technologyfund.ch/)
    20. Profiter de subventions lors de rénovations | Le Programme Bâtiments (leprogrammebatiments.ch) (https://www.leprogrammebatiments.ch/fr/)
    21. Subsidy programmes for energy and mobility – energy francs (francsenergie.ch) (https://www.francsenergie.ch/fr)


Regardless of sector, companies should be aware of the Swiss policy shift toward renewable sources and growing taxation of energy usage. Now is a good time to review the business’s energy supply and consumption. It’s also only a matter of time until carbon taxes are on the agenda across industries.  Procurement and sales structures – in other words the who and where of purchasing – have the most impact on manufacturing footprints. An early assessment can aid in understanding the current state – and designing the future.

Besides aligning business models to the regulatory landscape, companies should ensure that they make the most of federal, cantonal and municipal programs to support energy efficiency.  The portal EnergieFranken, for example, is a valuable resource for funding sources at all levels.


We thank Anouck Saugy for her valuable contribution to this article. 

About this article

By Nathan Richards

Partner, EMEIA Tax Centre, Transfer Pricing and Operating Model Effectiveness | EMEIA

Designs and transforms to sustainable operating models. Green tax element evaluation and planning. BEPS-aligned operating model solutions. Transfer pricing planning and controversy management.