When will you take the initiative in the green economy?

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.

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.

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.

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).

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.

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.