Switzerland dismisses EU plan for carbon border tax

The government said it was concerned about the regulatory and commercial risks that a carbon border tax would present. Copyright 2023 The Associated Press. All Rights Reserved

The Swiss government is taking a wait and see approach on the European Union’s plan to set up a Carbon Border Adjustment Mechanism, aimed at stopping countries relocating production to places with weaker climate rules.

In a press releaseExternal link on Friday, the government recommended against the introduction of the EU carbon border tax plan because of “regulatory and commercial risks”. It plans to continue developing the carbon emissions trading scheme with the EU but would like to have a certain “leeway” until the EU has developed the Carbon Border Adjustment Mechanism (CBAM) and implementing rules.

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The EU proposal for the carbon border mechanism seeks to prevent carbon leakage, which happens when production is relocated to countries with less stringent carbon emissions legislation. The mechanism is a form of carbon tax, which is added to the price of certain imports. This aims to equalize the price of carbon paid for EU products operating under the EU Emissions Trading System, which allows companies to buy and sell carbon credits to lower overall emissions.

The mechanism is one of the elements of the EU Green Deal, which aims to reduce greenhouse gas emissions by 55% by 2023. EU countries should start implementing the mechanism in a transitional phase focused on carbon intensive sectors on October 1, 2023.

With many details regarding the concrete implementation of the mechanism still to be defined, wrote the government, it’s difficult to estimate the additional administrative burden that it will generate for Swiss companies. The CBAM “would also only benefit a small number of carbon-intensive industrial facilities in Switzerland, while generating disadvantages for the rest of the economy,” it added. 

Switzerland is not obliged to set up the mechanism under the agreement with the EU on linking up emissions trading schemes, which came into force in January 1, 2020.